MakerDAO Pressed By Rising Debt As DeFi Leader Moves To Stabilize Protocol

Jose A Hernandez Marquez 14 March, 2020

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MakerDAO's crash shutdown option, which was weighed by community members following the emergence of a $ 4 million debt bubble on the decentralized finance platform (DeFi), will not happen at this time. If the Maker team triggered a shutdown, all the dai stablecoins in circulation would be converted to the underlying asset, Ether (ETH).

A flaw in Maker's system for generating collateralized debt positions (CDP) caused about $ 4 million to be spent on ether for free. This was caused by network congestion on Ethereum and Maker's pricing oracles. They don't update fast enough. However, the amount of debt on the Maker platform continues to increase, reaching almost $ 5.7 million at closing of this issue on Friday.

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MakerDAO faces one of its main challenges

This is likely caused by mainchain congestion on Ethereum and the inability to add collateral to positions on Maker. GAS prices on the Ethereum mainnet continued to rise in the early UTC hours on Friday. With prices reaching 200 Gwei, according to the data site Eth Gas Station.

In an executive vote on Friday, the Maker team is expected to address three pressing issues after Thursday's turmoil. The Dai peg, system debt and debt auctions. The 12 listed proposals voted on by MKR holders were intended to normalize the platform's operations.

Regardless of chain congestion, people with Dai loans have poured ETH into the Maker protocol. To prop up positions that could be left unsecured if another drop in ETH is reached. However, those who were unable to obtain guarantees in the system to cover their loans were liquidated by the protocol.

In an earlier vote on Friday, the MakerDAO community voted to adjust the system's risk parameters. Although the move comes in the wake of a dramatic 30 percent drop in the price of ETH. The changes were first discussed during a Governance call on March 5.

In general, MakerDAO stakeholders are now focused on returning the dai to its 1: 1 ratio to the US dollar. After investors rushed to the stablecoin as a safe haven.