Decentralized finance protocol Aave said it is rolling out a fresh swap blocking feature with a price impact of more than 25% after a user lost $50 million in a trade while interacting with the Aave interface last week.
“We are soon rolling out a new feature, Aave Shield, which provides better protection for users using the exchange feature on the Aave aave.com interface,” Aave he said in Saturday’s autopsy.
Aave said users will have to manually disable the Aave Shield protection feature to proceed with high-risk transactions.
The incident occurred on Thursday when a user opted to exchange $50.4 million worth of Aave (AAVE) for Aave (AAVE) through the decentralized exchange CoW Swap, but only received $36,500 worth of Aave due to illiquidity and other infrastructure failures, resulting in a loss of just over $50 million.
Part of this loss was also the result of a maximum extraction value (MEV) bot that launched a sandwich attack on the user, netting a profit of almost $10 million.
The user ignored many warning signs
Aave said the user signed the transaction despite multiple warnings appearing on the platform’s interface.
This included notices of “high price impact” and information that the route may have a lower return due to low liquidity or diminutive order size.
The user also checked the confirmation box stating: “I confirm the exchange with a potential loss of 100% of the value,” Aave said.
The incident shows that DeFi still needs work: CoW DAO
While Aave and CoW DAO, the team behind CoW Swap, say penniless liquidity led to “extreme price impact,” CoW DAO added that multiple infrastructure failures also played a role.
CoW DAO found that Solver – a third-party service that finds the best way to conduct a transaction – was affected by an obsolete gas cap that blocked offers at better prices and left only a much worse option for the user to consider.
CoW DAO noticed that one of the solvers, which had a significantly cheaper price quote, also failed to submit transactions to the transaction chain when given the opportunity to do so.
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The CoW DAO said a possible memory leak may have contributed to the $50 million valuation.
“We do not yet have final answers to all of the issues raised above,” the CoW DAO said, adding that it is “committed to working transparently on them, with Aave and the broader community.”
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