MakerDAO has taken drastic steps to protect its DeFi activity against the influence of the USDC depeg event.
On the morning of March 11, before the impact of the collapse of Silicon Valley BankUSDC, the second largest stablecoin by market cap, lost its peg and at one point hit $0.87 – the lowest since its creation in 2018.
As a stablecoin with a top 2 capitalization, very popularly used in many protocols, USDC lost its peg and suffered from constant bad news causing great anxiety in the market, causing a series of other names such as BUSD, DAI, FRAX, USDD… also depeg.
Against this backdrop, MakerDAO – the current top 1 lending protocol in the DeFi industry and the behind stablecoin DAI – has made an urgent proposal regarding loans and liquidity pools exposed to USDC, specifically as follows:
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.
first/ pic.twitter.com/LQRgHbDzYF
— Maker (@MakerDAO) March 11, 2023
Reduce debt ceiling to zero for USDC .-related collateral: Types of USDC-related collateral include UNIV2USDCETH-A, UNIV2DAIUSDC-A, GUNIV3DAIUSDC1-A, GUNIV3DAIUSDC2-A will not be used for collateral and DAI loans. This proposal ensures there is no risk of mass liquidation creating damage to both the protocol and users as USDC continues to lose pegs.
Reducing DAI mint parameter via PSM-USDC-A: PSM is a vault to secure liquidity and hold pegs for DAI. Before the bad fluctuations of USDC, a large amount of USDC was deposited into Maker’s PSM-USDC Vault to mint DAI to avoid risks. However, if USDC continues to depeg, Maker will have to “take the risk to heart”. To prevent this, the protocol has proposed to reduce from a maximum of 750M DAI minted daily via PSM-USDC to only 250M DAI/day.
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
Reduce DAI mint limit parameter from PSM-GUSD-A: Although GUSD is not currently associated with Silvergate or Silicon Valley Bank, however, GUSD has risks related to uninsured deposits at banks and credit institutions. To avoid a chain collapse, MakerDAO proposes to reduce the DAI mint limit parameter from PSM-GUSD-A from $50 million/day to just $10 million/day.
Increase DAI mint limit parameter from PSM-USDP-A: After reducing the parameters from the above 2 PSM vaults, to ensure that DAI still holds the peg and has stable liquidity, Maker decided to increase the limit parameter of PSM-USDP-A.
Compound V2 D3M: Since Compound V2 uses a fixed price of 1 USD for USDC, MakerDAO has decided to deactivate and withdraw funds from this vault to avoid risk.
AAVE V2 D3M: Unlike Compound, AAVE V2 uses market price through Oracle, but with the current market situation, Maker also decided to withdraw and deactivate this program.
Governance Security Module: Finally, to ensure timely delivery of recommendations in line with market fluctuations in the near future, the MakerDAO protocol decided that the review and application of proposals would reduce the delay from 48 hours to only 12 – 24 hours.
The project is calling on MKR governance token holders to participate in the vote to get the proposal approved as soon as possible, thereby applying the above changes to the protocol.
MakerDAO on March 11 also reassured users that although more than 50% of DAI’s collateral assets are in the form of USDC, the value of collateral assets is 154% higher than the amount of DAI circulating in the market. market, so the stablecoin’s system is still operating normally and has not recorded the liquidation of collateral.
Total collateralization of the system is at 154% with $8.26 billion worth of collateral backing 5.38 billion DAI.
No liquidations have been triggered during the last week.
System is working as expected, and has always been.
Maker Protocol’s code is law for DAI stability. pic.twitter.com/zmuaR2XFXG
— Maker (@MakerDAO) March 11, 2023
Synthetic Kyptos
