Aave Releases Analysis of "$50 Million Loss from Buying AAVE" Incident: Root Cause Was Insufficient Liquidity, Not Slippage

Deep Tide TechFlow News, March 15 — Aave released a post-incident analysis of the Swap event:
"On March 12, 2026, a user executed a token swap through the CoW Swap router integrated into the Aave interface. The user attempted to exchange 50,432,688 aEthUSDT (worth approximately $50.4327 million) for aEthAAVE. Due to the unusually large size of the user’s order in a market with insufficient liquidity, CoW Swap’s quotes were extremely wide, and the user confirmed acceptance of the quote. It should be noted that the Aave protocol itself was never at risk, as this swap occurred outside the protocol via a third-party swap protocol. Currently, the user has not contacted the Aave team.

The key issue in this incident was market illiquidity, not slippage. Illiquidity refers to the market’s inability to provide enough assets at a specific price to fulfill large orders, causing significant price deviations. The user’s order far exceeded the available market liquidity, and CoW Swap’s quote was 99.9% below the expected market clearing price. The unfavorable outcome resulted from the user confirming the quote, not from price changes during execution.

The root cause of this incident was routing large trades in a market with insufficient liquidity, leading to extreme price impacts. The user confirmed a clear warning on the interface before executing the trade. To prevent similar events, an Aave Shield will be introduced in the Swap widget: by default, it blocks exchanges with price impacts exceeding 25%. Users must manually disable this feature to execute high-risk trades. The transaction incurred approximately $110,368 in fees, which will be refunded after user verification."