Blockchain

The $27 million liquidation event on Aave was caused by a configuration problem with the CAPO oracle

2026-03-11 09:49:52

Chaos Labs: $27M Aave Liquidation Triggered by CAPO Oracle Misalignment—No Bad Debt, Users to Be Compensated

That $27 million liquidation on Aave? It wasn't market volatility—it was a configuration glitch. Chaos Labs released a post-mortem tracing the issue to CAPO's risk oracle. The problem: a mismatch between snapshotRatio and snapshotTimestamp due to conflicting on-chain update constraints.

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The snapshotRatio could only move 3% every three days, so it got stuck at 1.1919 instead of hitting the target 1.2282. But the timestamp jumped back seven days just fine. That misalignment meant CAPO's calculated rate ceiling (1.1939) ended up 2.85% below the real market rate—triggering a cascade of 10,938 wstETH liquidations.

No bad debt, though. Chaos and BGD Labs moved fast: slashed the wstETH borrow cap to 1, manually fixed parameters, and got things back in line. So far, 141.5 ETH has been recovered via BuilderNet and will go to affected users. The rest gets covered by Aave's treasury, with DAO compensation expected to stay under 345 ETH.

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