A cryptocurrency trader suffered a catastrophic $50 million loss last week by approving an extremely imbalanced swap on the Ethereum blockchain. The trader converted $50 million worth of USDT stablecoin for just 327 Aave tokens, valued at approximately $37,000. The biggest beneficiary was Ethereum block builder Titan, who profited at least $35 million from the ensuing arbitrage frenzy, while arbitrage bots collectively gained around $13 million. The incident has sparked debate over responsibility and prompted the involved DeFi protocols to announce new safeguards.
A crypto trader immolated $50 million by agreeing to a lopsided swap through decentralized finance apps last week. The trader exchanged $50 million in USDT for just 327 Aave tokens, worth about $37,000.
“Before confirming the transaction, the user was shown a clear warning on Aave’s interface indicating that the trade carried an extraordinary price impact,” Nikita Ovchinnik, CEO of solver firm Barter, stated. The interface required an additional confirmation step on a mobile device before the order was approved.
Post-mortems from Aave and CoW Swap revealed the trade used a Sushiswap liquidity pool with less than $100,000 in assets. Many experts have since suggested additional safeguards to prevent such imbalanced trades.
The largest profit, at least $35 million, went to Ethereum block builder Titan. Arbitrage bots rushed to rebalance the skewed liquidity pool, offering Titan massive tips for priority block placement, and collectively profited around $13 million.
Aave received just over $110,000 in fees from the trade and has offered to return them. The trader has not yet accepted the offer.
CoW Swap, which executed the trade, saw its solver generate a small surplus and earn a fee of around $340. The swap was routed through liquidity pools on Uniswap and Sushiswap, which also collected fees.
The conversation now centres on blame and prevention. In its analysis, Aave said it is implementing a feature called Aave Shield to block swaps with a price impact over 25%.
CoW Swap said it is investigating solver execution failures and a potential mempool leak. “The user owns none of this failure,” blockchain researcher Ehsan said in the aftermath.
