- Aave will introduce “Aave Shield” to block swaps with a price impact above 25%.
- A user lost $50 million when converting USDT to AAVE due to extreme price impact and infrastructure failures.
- The user allegedly approved the transaction despite multiple on-screen warnings about potential total loss.
Aave is launching a new safety feature after a critical failure last week where a user lost $50 million through its platform interface. The Aave protocol consequently suffered a major exploit on Thursday involving a large token swap.
The user attempted to convert $50.4 million in USDT to AAVE via the decentralized exchange CoW Swap. Due to a lack of available liquidity, the transaction resulted in a staggering $50 million loss for the individual.
Aave announced the new feature, called “Aave Shield,” in a post-mortem statement on Saturday. This security tool will automatically block trades with a price impact exceeding 25%.
Users will need to manually disable the protection to proceed with high-risk transactions. Aave stated the individual signed the deal despite multiple explicit warnings flashing on the interface.
These included alerts for a “high price impact” and notices about low liquidity. The user also confirmed a box that read, “I confirm the swap with a potential 100% value loss,” as shown in Aave’s statement.
CoW DAO, the team behind CoW Swap, acknowledged the incident showed DeFi still needs significant work. The organization cited several infrastructure failures alongside extreme price impact from poor liquidity.
For example, an outdated gas limit blocked better-priced quotes from a solver. Meanwhile, a separate solver with a cheaper quote also failed to submit the transaction onchain when it had the chance.
A Maximal Extractable Value (MEV) bot further executed a sandwich attack on the user. This malicious action siphoned nearly $10 million from the disastrous trade.
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