Large-scale liquidations worth $27 million occurred on DeFi lending platform Aave, CoinDesk reported on March 10. The incident appeared to be caused by a temporary error in the price oracle system used by Aave.

A price oracle is a service that provides external price data to blockchain applications. Lending protocols use it to force liquidations of undercollateralised loans. In this case, the oracle incorrectly reflected the value of wstETH, triggering unexpected liquidations, CoinDesk reported.

The disruption began with a configuration error in Chaos Labs’ risk oracle. wstETH is staking ether issued by Lido, designed to rise in value over time. Aave’s oracle valued it at 1.19 ETH, while it was trading at 1.23 ETH in the market. Some loan positions were forcibly liquidated after exceeding safety limits, CoinDesk reported.

Chaos Labs explained that the oracle itself reported the correct market value, but liquidations occurred as outdated parameters stored in a smart contract overlapped with a time lag.

Lido said, "These liquidations were due to an error in the oracle mechanism and are unrelated to wstETH or the Lido protocol." Aave did not disclose an official position on the incident.