A trader attempting to swap $50 million USDT for AAVE on the decentralized finance protocol Aave ended up receiving just 324 AAVE, after accepting a quote with an extreme 99% price impact.
What happened
- The trade was executed through CoW Swap, an auction-based system designed to find the best liquidity across decentralized exchanges.
- Despite the platform functioning as intended, the quote itself was extremely unfavorable, and the user had to manually confirm a warning about the high price impact on a mobile device before proceeding.
- The interface also required a checkbox acknowledgment of the risk.
Response from Aave
- Founder Stani Kulechov said that while DeFi transactions can occasionally go wrong, the size of this swap was far beyond typical activity.
- Aave plans to refund roughly $600,000 in transaction fees to the user.
- The team is reviewing the platform’s user-protection safeguards and working with CoW Swap to understand why liquidity routing produced such a poor quote.
Technical details
- The trade carried about 99% price impact from the start, not related to slippage settings.
- The user’s slippage tolerance was set at 1.21%, and analytics suggest the trader even received a 0.7% surplus from the auction.
- Engineers confirmed that price-impact warnings were displayed and the trade required explicit confirmation.
Aave emphasized that it’s exploring stronger protections to prevent similar incidents in the future, while maintaining the permissionless and decentralized nature of the platform.
