How MakerDAO Intervened, Saving DAI From Depegging
13 Mars 2023 - 7:30PM
NEWSBTC
MakerDAO, the protocol behind the decentralized stablecoin DAI,
intervened and saved its stablecoin from de-pegging following the
collapse of Silicon Valley Bank (SVB). The failure of the tech
lender significantly affected Circle’s fiat-backed USDC.
DAI fell to as low as $0.88 versus the dollar on March 11
before recovering to trade at $0.99 on March 13. MakerDAO
Implements Emergency Measures Over the weekend, the Risk Core Unit
of MakerDAO submitted an emergency proposal for an
Executive Vote to limit MakerDAO’s exposure to “impaired”
stablecoins and reinforce the DAI peg. The majority of the
community backed the proposal, with 88,767 supporters in approval.
Only 47 MKR holders were against this idea. To address the
uncertainty surrounding the centralized stablecoin market, the Risk
Core Unit has submitted an emergency proposal for Executive Vote to
limit Maker’s exposure to impaired stablecoins and reinforce the
DAI peg. → https://t.co/Kjb0fSlZNX 1/ pic.twitter.com/LQRgHbDzYF —
Maker (@MakerDAO) March 11, 2023 The proposed changes include
reducing the daily mint limit (gap) to 250 million DAI and
increasing the USDC to DAI swap fee (tin) to 1% to discourage
swapping USDC for DAI via the PSM. The PSM is a Maker Vault that
maintains 100% collateralization and a 0% stability fee. Reducing
the gap parameter from 950 million DAI to 250 million DAI will
reduce daily minting limits to 250 million DAI. Related
Reading: MakerDAO Is Raking Big Money, But Why Is It Under Fire?
Within 24 hours, 736 million DAI were minted through USDC using
PSM, and the net supply for DAI increased by 296 million. The
increase in the tin parameter prevents excessive dumping of USDC
into the PSM, incentivizing users to dispose of USDC via other
methods and ensuring it is only used if the DAI price significantly
diverges upwards. In the last 24 hours, a total net of 736 million
DAI has been minted against USDC through the PSM. →
https://t.co/brBzEorsc1 pic.twitter.com/LagDeVBKU0 — Maker
(@MakerDAO) March 11, 2023 In addition to limiting Maker’s exposure
to potentially impaired stablecoins, the proposed changes aim to
maintain enough liquidity to prevent DAI from trading significantly
above $1 if conditions change. It also ensures adequate market
liquidity to process potential liquidations of
crypto-collateralized vaults. Limiting Exposure To Protect DAI Peg
The proposed changes are not restricted to USDC. It would also
affect the PSM-GUSD-A gap, which was reduced from 50 million to 10
million DAI to limit potential losses if Gemini faces contagion
risk from its bank deposits. Related Reading: MakerDAO Passes
Proposal To Deploy $100 Million USDC In Yearn Finance Vault On the
other hand, with Paxos Dollar, USDP, the maximum debt ceiling line
was increased to 1 billion from the current 450 million in
PSM-USDP-A. Meanwhile, the PSM-USDP-A gap increased from 50 million
to 250 million DAI. This proposal enables Paxos to provide
necessary backstop liquidity to prevent DAI from trading over the
$1 target price. Subsequently, this cushions against any impact on
liquidation safety in the event of a crypto market crash like it
did happen last week. Feature Image From BainCapitalCrypto, Chart
From TradingView
Maker (COIN:MKRUSD)
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Maker (COIN:MKRUSD)
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