Aave Launches Shield After $50M Slippage Incident

A decentralized finance protocol, Aave, has introduced a new safety feature called Aave Shield following a trading incident in which an anonymous user suffered a loss of approximately 50 million dollars due to extreme slippage on a large-scale cryptocurrency swap executed through its interface.

The event unfolded on March 12, when the trader attempted to exchange about 50.4 million dollars worth of USDT, a stablecoin, for Aave's native AAVE token via an integration with CoW Swap, a decentralized exchange aggregator. Due to insufficient liquidity in the targeted trading pools, particularly a shallow SushiSwap pool with around 73,000 dollars in depth, the transaction resulted in severe price impact. The user ultimately received only about 327 AAVE tokens, valued at roughly 36,000 dollars at the time, representing a near-total slippage of 99.9 percent. Aave officials described the mismatch between the order size and available liquidity as the primary cause, amplified by the mechanics of automated market makers that steepen pricing curves under stress.

Compounding the loss, a maximal extractable value bot executed a sandwich attack on the transaction, profiting nearly 10 million...