After a period of pause due to concerns about negative effects from liquidity “bombs”, MakerDAO has officially re-launched the Direct Deposit Module (D3M) program, with the first partner being the lending platform Aave.
On MakerDAO’s Twitter page, the protocol said it would relaunch D3M, with credit in the form of DAI pumped into lending markets on Aave.
🌊 MakerDAO reactivates the @AaveAave Direct Deposit Module (D3M)
Through a wholesale credit line denominated DAI, D3M facilitating the interaction between Maker’s credit facility engine and Aave’s lending market, guaranteeing a stable borrow rate for Aave’s DAI users. pic.twitter.com/gZ8fxXFGqA
— Maker (@MakerDAO) February 28, 2023
After a period of proposals and voting on the MakerDAO community, the D3M solution will be deployed to balance supply and demand, ensuring interest rate stability for DAI stablecoin.
Previously, in May 2022, MakerDAO announced to suspend D3M due to concerns about liquidity problems on lending platforms like Aave or Compound. This step at that time was considered necessary, in order to minimize the chain effect and unnecessary bad debts.
> See more: MakerDAO stopped “pumping money” for Aave for fear of risks from Celsius
This move shows that DeFi protocols have initially returned to normal operation, after many events in 2022 such as the collapse of stablecoin UST or FTX exchange.
D3M will be the coordinating layer, helping to balance the amount of collateral and the amount of DAI loaned to the market. Specifically:
- If the loan demand is large, the interest rate is higher than the target level, D3M will mint more DAI to rebalance the interest rate.
- Conversely, if the interest rate is lower than the target level, D3M will withdraw to reduce the supply of DAI, thereby pulling the interest rate to the target threshold.
From there, users on Aave can easily access DAI loans with an interest rate that is much more stable than the usual volatility.
However, the current debt ceiling of D3M will be very low, 5 million USD with a target interest rate of 2%.
The Aave D3M reactivation proposal was approved and deployed through the latest MakerDAO Executive Vote.
This new Aave D3M deployment has set an initial debt ceiling of 5 million DAI and a target borrow rate of 2%.
— Maker (@MakerDAO) February 28, 2023
If the market becomes more active and positive in the near future, the proposals to raise the debt ceiling from MakerDAO are feasible, thereby helping the capital flow to lending platforms like Aave become smooth and abundant. than.
D3M with debt ceiling of 5 million DAI deployed to @AaveAave protocol.
5 million of fresh DAI generated and supplied to @AaveAave protocol’s DAI market.
🌊🌊🌊 pic.twitter.com/prTVJI9i4O
— Maker (@MakerDAO) February 28, 2023
Up to the time of writing, the amount of capital deployed for D3M quickly reached the ceiling of 5 million USD.
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