Aave launched the Aave Shield feature, a new default protection mechanism that automatically blocks any token swap on its interface making more than 25% price impact.
A $50M swap gone wrong
The feature comes after an incident earlier this month in which a trader converted roughly $50.43 million worth of aEthUSDT into just a handful of aEthAAVE tokens valued at approximately $36,000. The interface displayed warnings about high price impact and low liquidity risk, and included a checkbox that the user checked, saying, “I confirm the swap, which could result in a 100% loss in value”, and ultimately lost $50M.
The user initiated a massive swap through the CoW Swap embedded in the Aave platform. Despite a series of escalating warnings displayed on the interface, the trader proceeded on a mobile device.
With this incident, an MEV bot sandwiched the transaction, extracting nearly $10 million in profits while the user ended up with merely 324 to 327 aEthAAVE tokens.
Aave collected roughly $110,000-$600,000 in fees from the trade and has already said they’ll refund it once they verify the wallet.
Aave adds a safety net
Now Aave Shield steps in as a safety net. It turns on by default and blocks all trades over 25% price impact. If someone really has to take the risk, they have to go into settings and turn it off themselves.
Aave founder Stani Kulechov posted a detailed post-mortem, saying the user didn’t mess up the slippage tolerance setting. The real issue was accepting a quote that was terrible because there simply wasn’t enough liquidity to handle such a big swap.
The CoW Swap team added that some technical glitches played a part, old gas limits blocking better quotes, a solver that won but didn’t actually send the transaction, and maybe even a mempool leak that made the quote look worse than it should have.
