Aave Releases $50M Swap Loss Post Mortem, Announces Changes

Following last week's disastrous attempt by a user to purchase $50M worth of AAVE tokens through the Aave interface, which resulted in a near total loss, Aave has released an incident post mortem, detailing what went wrong and how similar catastrophes can be prevented moving forward.

What's the Scoop?

• Incident Background: According to Aave, the transaction in focus failed due to an illiquid market rather than slippage, as the order itself moved the market price. The user apparently disregarded automated warnings about the immense price impact of swapping $50M aEthUSDT (USDT deposited into Aave V3 on Ethereum) into AAVE tokens.
• Multiple Pain Points: While the conversion (routed through CoW Swap) of aEthUSDT into USDT was flawless, burning the deposit tokens for ~$50M USDT, the next step only returned ~$37M when USDT was swapped for WETH on Uniswap. The total was further reduced to ~$36k when WETH was swapped for ~331 AAVE through SushiSwap.
• New Safety Feature: In hopes of preventing similar disasters, Aave will implement a feature called "Aave Shield," which will automatically blocks all swaps with a price impact greater than 25%, and require users to manually disable the guardrail via settings menu before proceeding with high-risk trades through the Aave interface.