MakerDAO Governance Votes on Liquidation System Upgrade

Share Article
In Brief
  • Dai peg and collateral protections included in new upgrade.

  • More functionality for MakerDAO smart contracts.

  • MKR drops 7% on the day but up 25% on the week.

  • promo

    Free Cloud Mining Providers to Mine Bitcoin in 2021

The Trust Project is an international consortium of news organizations building standards of transparency.

In its latest governance vote, DeFi lending and stablecoin platform MakerDAO has proposed an upgrade to the protocol’s liquidations system, which should help safeguard Dai’s stability.

Sponsored



Sponsored

In an April 19 blog post, MakerDAO announced that the liquidations 2.0 upgrade executive vote had gone live.

The upgrade, if passed, will implement Maker Improvement Proposal 45 (MIP45). The implementation would redesign the current system of liquidations on the network.

Sponsored



Sponsored

The team stated that the upgrade represents a year’s worth of work and a great deal of community feedback and support.

“Importantly, it also marks the last major technical and functional contribution that any Foundation team will provide the DAO as it moves toward complete decentralization.”

Protecting the Dai

The move comes 13 months after the infamous ‘Black Thursday’ event. On March 12, 2020, following an Ethereum collateral price crash, around $4 million in Dai was liquidated.

The current system of liquidations helps Dai maintain its soft peg to the USD. All of the Maker Vault stablecoins are backed by collateral. The vault is liquidated when the value of that collateral falls below the minimum required liquidation ratio. The collateral is auctioned to cover both the debt and the liquidation penalty.

MakerDAO stated that there have been many changes to warrant the upgrade. These include the introduction of multi-asset collateral and the massive increase in Dai circulating. Since the beginning of 2021, the Dai in circulation has surged over 200% to a peak of 3.4 billion.

The team claims the new system is better suited for DeFi:

“Functionally, the new Liquidations system will provide greater security, predictability, and decentralization, facilitating wider participation by the Maker community and DeFi sector as a whole.”

Big Upgrade For MakerDAO

The upgrade will introduce a new auction model. In this system, the initial asking price is high and will decreases deterministically over time. Buying large lots of vault collateral will no longer be necessary. And in the new system, one or any number of bidders could purchase collateral at the asking price.

There will be potential DEX and aggregator integration, allowing greater competition between bidders. Access to more of the market’s liquidity and flash loans will also be supported.

There will be several modifications to the smart contracts. These include an increase of the ‘Emergency Shutdown Threshold’ from 50,000 to 75,000 MKR.

Over 4,200 MKR have already pledged in favor of the upgrade proposal. According to CoinGecko, MKR was trading down 7% on the day at $3,340. However, it was still up over 25% since the same time last week.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
Sponsored
Share Article

Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

Follow Author

Crypto predictions with the Best Telegram Signal with +70% accuracy!

Join now

Free Cloud Mining Providers to Mine Bitcoin in 2021

Go

How To Mine Cryptocurrency: Beginner’s Guide

Let's Go