After Black Thursday, MakerDAO Opens Voting Proposal And Will Hold First-Ever Debt Auction
As Ethereum (ETH) price crashed by 30-40% on “Black Thursday”, the decentralized finance world (DeFi) showed signals of collapse with the largest DeFi protocol, Maker (MKR) contemplating shutting down in response to the value tanking.
However, following talks in the community with MakerDAO –governing council – and a revival of the price of ETH over the early morning on Friday, March 13, 2020, the community will vote on changes of the protocol to further carry out its first-ever debt auction.
Maker (MKR) is a platform that gives out collateral-based loans by producing Dai (DAI). The DAI is minted by users taking up collateral-based positions, mostly in ETH, and the ETH is stored on a smart contract. Once the collateral is locked, the contracts mint out a portion of the collateral value in DAI to give to the borrower.
Maker to carry out the first-ever Debt Auction
If the borrower cannot fulfill their debt obligations, then the collateralized ETH (asset) enters the liquidation phase allowing the smart contract to auction it off to pay the debts. However, as the crypto market exhibits an extremely bearish structure and the heightened pandemic of the COVID-19, the auctions were shortly not very attractive with some investors paying a total of ZERO DAI to gain the ETH.
One Maker community member said,
“Some vaults were liquidated with 0 DAI coming back in the system, resulting in a net loss for the system. The MakerDAO had a +500k$ surplus before the price drop and now has a -4M$ surplus that needs to be filled.”
With the Maker platform facing a $4 million deficit in debt obligations, the contract will self-execute on March 15 to open up the first-ever Maker Debt Auction. This means the contract will print out extra MKR tokens to reimburse the 44 million USD in DAI which will then be publicly available for auction.
The community signalled that it would like the opportunity to vote on the executive early, the proposal is now live in the portal at https://t.co/g9vSgxm089.
The blog above has been updated to reflect this.
The updated forum post is here: https://t.co/DGppLo5ugS
— Maker (@MakerDAO) March 13, 2020
The community is, however, remaining positive after the current carnage on Maker, stating the platform has become stronger. One member said,
“It was a trying day for #Ethereum, Maker, investors, and lots of other ppl in #defi — great to see the system prevail and while not perfect, it lives to see another day.
MakerDAO teams already reacting to work with $MKR governance to modify the system state.”