A crypto user lost around $50 million in a single transaction on Thursday after executing a large token swap that triggered a massive skid.
Blockchain data shows that the wallet attempted to exchange $50,432,688 worth of aEthUSDT – an interest-bearing token representing Tether’s USDT stablecoin deposited in the decentralized lending protocol Aave on the Ethereum network – for aEthAAVE – a similar version of Aave governance tokens – via the CoW protocol.
The trade was executed with over 99% slippage due to low liquidity in the affected trading pools, leaving the wallet with only around 327 aEthAAVE tokens, worth around $36,000 after the trade. The difference in value was quickly captured by arbitrage traders and network intermediaries.
Within the same block – or batch of transactions recorded simultaneously on the blockchain – arbitrageurs extracted more than $43 million in profits, blockchain security firm BlockSec told CoinDesk. Of that amount, $32.6 million went to the block builder, the specialized entity that assembles and orders transactions before the block is finalized.
Large losses caused by slippage sometimes occur in decentralized finance (DeFi) when traders attempt to execute unusually large orders on shallow liquidity pools. In such cases, automated arbitrage systems quickly exploit the price dislocations created by the transaction.
Stani Kulechov, founder of the Aave protocol, said the transaction went through despite multiple warnings presented to the user before confirming the transaction.
“Earlier today, a user attempted to purchase AAVE using $50 million USD through the Aave interface,” Kulechov said in an article
According to Kulechov, the user accepted the warning on his mobile device and proceeded with the transaction, explicitly recognizing the high risk of slippage.
“The transaction could not move forward without the user explicitly accepting the risk,” he said, adding that CoW Swap routers worked as expected and followed industry standard practices.
Still, the result was “clearly far from optimal,” Kulechov said.
Kulechov said Aave plans to contact the affected user and return approximately $600,000 in fees collected during the transaction.
The loss comes just days after the liquidation of approximately $27 million on Aave, which some market participants believe may have been caused by a temporary pricing glitch involving the wstETH token.
UPDATE (March 13, 8:45 UTC): Adds transaction context from blockchain security company BlockSec.
