Lido clarifies liquidation incident on Aave: oracle failure, not protocol failure

On March 11, 2025, Lido confirmed that a misconfiguration in Aave’s price oracle caused erroneous and unexpected liquidations of wstETH positions within the platform’s E-Mode. Lido emphasizes that the issue is solely related to Aave’s price feed network and does not affect the integrity of its underlying assets or the operation of the Lido protocol.

Faulty Oracle Caused Unjustified Liquidations of wstETH

The malfunction originated in Aave’s CAPO oracle system, responsible for providing real-time price data. This faulty setup generated incorrect collateral calculations, triggering automatic liquidations of legitimate positions in E-Mode. It is estimated that approximately 345 ETH were mistakenly liquidated due to this error.

It is important to note that users did not breach their contractual obligations; they were simply victims of poor price calculation within Aave’s infrastructure. Lido emphasizes that wstETH is functioning correctly and maintains its backup mechanisms intact.

Full Compensation for All Affected Users

Lido has announced that it will provide full compensation to each user affected by the erroneous liquidations. The reimbursement process is already underway, ensuring that no investor suffers losses due to the price error outside their control.

Additionally, the platform has confirmed that there have been no missed payments or defaults in Lido user accounts. All users retain their positions protected, and access to their funds remains unrestricted.

Lido Earn Funds and wstETH Remain Secure and Operational

Lido reaffirms that the funds held in its products, especially Lido Earn and wstETH positions, are completely secure. The protocol continues to operate under its usual security standards, and the Aave incident does not compromise any aspect of Lido’s custody chain.

The platform urges users to maintain confidence in Lido’s technical integrity, noting that this event serves as a reminder of the importance of well-configured price oracles in DeFi ecosystems.