The decentralized finance protocol Aave is introducing a new safety feature called Aave Shield after a user lost approximately $50 million in a swap last week. The incident involved converting a large amount of USDt to AAVE via CoW Swap, resulting in a massive loss due to low liquidity and a sandwich attack by an MEV bot. Aave stated the user ignored multiple on-screen warnings, including one acknowledging potential 100% value loss.
The Aave protocol will deploy a new feature called Aave Shield to block swaps with a price impact exceeding 25%. This follows an incident where a user suffered a loss of roughly $50 million while using Aave’s interface to swap USDt for AAVE.
The user attempted to convert $50.4 million in USDt via decentralized exchange CoW Swap but received only about $36,500 worth of AAVE. Aave stated the user signed the transaction despite multiple warnings, including an alert for “high price impact” and a confirmation box stating, “I confirm the swap with a potential 100% value loss.”
Part of the loss resulted from a Maximal Extractable Value bot executing a sandwich attack, profiting nearly $10 million. CoW DAO, the team behind the exchange, cited poor liquidity and multiple infrastructure failures as contributing factors.
CoW DAO noted a solver with a better quote failed to submit the transaction, while another was blocked by an outdated gas limit. “We do not have final answers on all of the issues surfaced above yet,” CoW DAO said, committing to transparent investigation.
The new Aave Shield protection will be enabled by default, requiring users to manually disable it for high-risk trades. Aave detailed the upcoming feature in a post-mortem statement released on Saturday.
