The two-digit decline in ETH prices on March 12 had a negative impact on the decentralized financial community (DeFi). Makerdao's Single Collateral DAI struggled and the low ETH price caused millions of dollars of DAI to be discounted. The reason is due to the difference in price.
CMaker community struggle with the event black Swan
The MakerDao and stablecoin DAI project has been extremely popular in the past 12 months. The total locked value (TVL) in Maker hit an all-time high (ATH) on February 14, 2020. After reaching ATH on Valentine's Day, Maker's TVL has started to decline over the past 3 weeks. Things got a lot worse when the cryptocurrency market faced Corona fears and started a price drop 3 days ago. Then on March 12, the industry lost over $ 44 billion quickly and ETH price fell below the $ 100 range.
@MakerDAO situation explainer thread ELI10:
– 4.5M $ underwater due to auction fail
– Surplus Buffer of 500k eaten
Minting MKR is a seriously considered option.
Maker jargon in (), will try to use human words as much as possible
– Marc 'aDai is Money' Zeller (@lemiscate) March 12, 2020
“GExplain the situation of MakerDAO:
– Damages $ 4.5 million due to auction failure
– Additional loss of 500K
Exploit MKR is a serious choice.
Bidiom Maker's in () will try to use human words as much as possible"
Because the MakerDao project uses ETH as collateral, the reduced ETH puts significant pressure on the DAI stablecoin and mortgage loans. Not only does ETH price hurt DAI, but the oracle of Maker also had problems due to price differences on the exchange. While the entire crypto capitalization dropped billions of dollars on Thursday, the exchange rate for every coin became inconsistent and depending on which source was used. It is estimated that around 4 – 4.5 million DAI dollars below the mortgage price due to this event.
Big problems with DAI. Liquidators are acquiring undercollateralized vaults at zero cost. Check on your vaults and avoid liquidation at all costs. https://t.co/yKXQDtCUHN
– Chris Blec (@ChrisBlec) March 12, 2020
“The big problem with DAI. Liquidation has vault under mortgage price at equal cost 0. Check your vault and avoid liquidation at all costs".
This caused serious disruption for DAI holders and MakerDao project management team. According to one person, DAI's problems cost him 1,713 ETH from the Mortgage Debt Position (CDP) upon liquidation. The Maker developers group is expected to halt emergency operations right in the middle of the sell-off. However, this proposal is extremely controversial and unpopular.
– I am Nomad (@IamNomad) March 13, 2020
MakerDao has predicted the difficult situation from 2 years ago
MakerDao and stablecoins DAI have dealt with the issues before the asset tried to hold the dollar in April 2019. Nothing as serious as the March 12 cryptocurrency slaughter but MakeDao's 'black swan' event was predicted in June 2018. Post “An insight into Maker DAO, DAI and MKR” on the blog of Bennett Tomlin summarizes quite a lot of MakerDao's problems on March 12 two years ago. “DAI cannot always be mortgaged excessively, because there will be an event where the black swan destroys ETH prices. Tomlin added:
"My biggest fear here is that the ETH price is down 40% in 1 hour. There will be sellers of ETH to buy DAI if trading in pairs, creating a strong demand that drives our prices, and it's now easier to mortgage and generate more DAIs, but the value of the assets Mortgages are rapidly depreciating, thus leading to a greater likelihood that DAI will be lower than the mortgage price. "
“Managers and buyers Maker should be mentally prepared"
Defi Pulse shows that Maker's TVL right now has about $ 347 million on March 13 after a sell-off on Thursday. DeFi action yesterday has spurred a number of anomalies with collaterals and observers. see all the differences on many DeFi platforms. Twitter account Crypto Curious believes that Polychain and Dydx “have been trying to help MakerDao prevent many $ 0 bids in CDP auctions below the mortgage price”.
"During the time when the DAI surged to 1.05-1.09, there were a lot of DAI from Polychain address sent to DyDx. I believe they lent DAI on the exchange to provide additional liquidity to the system when they realized that there was only one bidder for the auction. By adding more DAIs to the group, trying to reactivate the liquidating bots that stopped working due to lack of DAI liquidity, "Crypto Curious tweeted.
Maker Group publish The blog post is called “Recent Market Activity and Next Steps”, which refers to the black swan event. Developers are discussing a system mortgage. "The MakerDAO community will hold an executive vote on Friday 13/3, to adjust the parameters to help ensure the same situation does not happen again. Details of the proposed adjustments below, focusing on auction parameters and Dai pegging are closer to 1 USD, "the team said on Thursday.
Defi proponent Ryan Berckmans explained in Maker's emergency message: "MakerDAO's social contract is MKR tokens reduced in the event of a system failure. MKR holders and buyers should prepare higher gas prices and downward pressure on ETH and MKR. The Dow Jones has broken the sell-off circuit 3 times in the past week and a half. It was a historic week. " The DeFi MakerDao project currently plans to hold an MKR management token auction on March 15, 2020. The plan is to recoup $ 4 million below the mortgage price due to the massacre on Thursday.
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