diff --git a/packages/daemon/__tests__/machines/SyncMachine.test.ts b/packages/daemon/__tests__/machines/SyncMachine.test.ts
index 2fa7ef47..2c628a59 100644
--- a/packages/daemon/__tests__/machines/SyncMachine.test.ts
+++ b/packages/daemon/__tests__/machines/SyncMachine.test.ts
@@ -590,3 +590,83 @@ describe('Event handling', () => {
     expect(currentState.matches(`${SYNC_MACHINE_STATES.CONNECTED}.${CONNECTED_STATES.handlingReorgStarted}`)).toBeTruthy();
   });
 });
+
+describe('Error handling', () => {
+  it('should transition to ERROR state when metadataDiff invoke errors', () => {
+    const MockedFetchMachine = SyncMachine.withConfig({
+      actions: {
+        startStream: () => {},
+        storeEvent: () => {},
+        logEventError: () => {},
+        stopHealthcheckPing: () => {},
+      },
+      guards: {
+        invalidPeerId: () => false,
+        invalidStreamId: () => false,
+        invalidNetwork: () => false,
+      },
+    });
+
+    let currentState = untilIdle(MockedFetchMachine);
+
+    // Transition to detectingDiff state
+    currentState = MockedFetchMachine.transition(currentState, {
+      type: EventTypes.FULLNODE_EVENT,
+      event: VERTEX_METADATA_CHANGED as unknown as FullNodeEvent,
+    });
+
+    expect(currentState.matches(`${SYNC_MACHINE_STATES.CONNECTED}.${CONNECTED_STATES.handlingMetadataChanged}.detectingDiff`)).toBeTruthy();
+
+    // Simulate metadataDiff service error by sending error.platform event
+    // This is what xstate sends internally when an invoked service rejects
+    currentState = MockedFetchMachine.transition(currentState, {
+      type: 'error.platform.SyncMachine.CONNECTED.handlingMetadataChanged.detectingDiff:invocation[0]',
+      data: new Error('Database connection failed'),
+    } as any);
+
+    // Should have transitioned to ERROR state due to metadataDiff failure
+    expect(currentState.matches(SYNC_MACHINE_STATES.ERROR)).toBeTruthy();
+  });
+
+  it('should NOT get stuck in detectingDiff when metadataDiff errors (regression test for COE)', () => {
+    // This test ensures the fix for the COE is in place:
+    // Previously, without onError handler, the machine would get stuck in detectingDiff
+    // Now it should transition to ERROR state
+
+    const MockedFetchMachine = SyncMachine.withConfig({
+      actions: {
+        startStream: () => {},
+        storeEvent: () => {},
+        logEventError: () => {},
+        stopHealthcheckPing: () => {},
+      },
+      guards: {
+        invalidPeerId: () => false,
+        invalidStreamId: () => false,
+        invalidNetwork: () => false,
+      },
+    });
+
+    let currentState = untilIdle(MockedFetchMachine);
+
+    // Transition to detectingDiff state
+    currentState = MockedFetchMachine.transition(currentState, {
+      type: EventTypes.FULLNODE_EVENT,
+      event: VERTEX_METADATA_CHANGED as unknown as FullNodeEvent,
+    });
+
+    expect(currentState.matches(`${SYNC_MACHINE_STATES.CONNECTED}.${CONNECTED_STATES.handlingMetadataChanged}.detectingDiff`)).toBeTruthy();
+
+    // Send error event - this should trigger the onError handler
+    currentState = MockedFetchMachine.transition(currentState, {
+      type: 'error.platform.SyncMachine.CONNECTED.handlingMetadataChanged.detectingDiff:invocation[0]',
+      data: new Error('Connection pool exhausted'),
+    } as any);
+
+    // The machine should NOT be stuck in detectingDiff anymore
+    expect(currentState.matches(`${SYNC_MACHINE_STATES.CONNECTED}.${CONNECTED_STATES.handlingMetadataChanged}.detectingDiff`)).toBeFalsy();
+
+    // It should be in ERROR state
+    expect(currentState.matches(SYNC_MACHINE_STATES.ERROR)).toBeTruthy();
+  });
+});
diff --git a/packages/daemon/__tests__/services/services.test.ts b/packages/daemon/__tests__/services/services.test.ts
index 69e07daf..6b874bd4 100644
--- a/packages/daemon/__tests__/services/services.test.ts
+++ b/packages/daemon/__tests__/services/services.test.ts
@@ -861,7 +861,7 @@ describe('metadataDiff', () => {
 
     await expect(metadataDiff({} as any, event as any)).rejects.toThrow('Mock Error');
     expect(mockDb.destroy).toHaveBeenCalled();
-    expect(logger.error).toHaveBeenCalledWith('e', new Error('Mock Error'));
+    expect(logger.error).toHaveBeenCalledWith('metadataDiff error', new Error('Mock Error'));
   });
 
   it('should handle transaction transactions that are not voided anymore', async () => {
diff --git a/packages/daemon/src/machines/SyncMachine.ts b/packages/daemon/src/machines/SyncMachine.ts
index 7bb50b2c..2d507ff6 100644
--- a/packages/daemon/src/machines/SyncMachine.ts
+++ b/packages/daemon/src/machines/SyncMachine.ts
@@ -207,6 +207,7 @@ export const SyncMachine = Machine<Context, any, Event>({
               invoke: {
                 src: 'metadataDiff',
                 onDone: { actions: ['metadataDecided'] },
+                onError: `#${SYNC_MACHINE_STATES.ERROR}`,
               },
               on: {
                 METADATA_DECIDED: [
diff --git a/packages/daemon/src/services/index.ts b/packages/daemon/src/services/index.ts
index 87e5a30f..86ad1308 100644
--- a/packages/daemon/src/services/index.ts
+++ b/packages/daemon/src/services/index.ts
@@ -96,9 +96,11 @@ export const METADATA_DIFF_EVENT_TYPES = {
 const DUPLICATE_TX_ALERT_GRACE_PERIOD = 10; // seconds
 
 export const metadataDiff = async (_context: Context, event: Event) => {
-  const mysql = await getDbConnection();
+  let mysql;
 
   try {
+    mysql = await getDbConnection();
+
     const fullNodeEvent = event.event as StandardFullNodeEvent;
     const {
       hash,
@@ -166,10 +168,12 @@ export const metadataDiff = async (_context: Context, event: Event) => {
       originalEvent: event,
     };
   } catch (e) {
-    logger.error('e', e);
+    logger.error('metadataDiff error', e);
     return Promise.reject(e);
   } finally {
-    mysql.destroy();
+    if (mysql) {
+      mysql.destroy();
+    }
   }
 };
 
@@ -466,10 +470,7 @@ export const handleVertexAccepted = async (context: Context, _event: Event) => {
     await mysql.commit();
   } catch (e) {
     await mysql.rollback();
-    console.error('Error handling vertex accepted', {
-      error: (e as Error).message,
-      stack: (e as Error).stack,
-    });
+    logger.error('Error handling vertex accepted', e);
 
     throw e;
   } finally {