DAI Rattled by Ether Price Drop
After the latest Ether price drop, Dai, a decentralized stablecoin built by MakerDAO, showed its reliability and weaknesses. Also, the DeFi (decentralized finance) ecosystem built on top of it.
Moreover, the Ethereum-collateralized decentralized stablecoin DAI somewhat maintained its peg to the United States dollar. However, ETH dropped over 18% of its value in less than two hours. The said cryptocurrency fell to $155 on Tuesday from its previous $190. Then, Ethereum holds a price of around $171 as of publishing time.
DeFi Saver, the DeFi protocol service, tweeted on September 24 that due to heavy congestion on the Ethereum network, the system grappled with making all required Collateralized Debt Position (CDP) ratio adjustments in time.
Aside from that, a smart contract central administer a loan like CDP to the functioning of the DAI stablecoin. Then, MakerDao wants to add support for other assets. And as of now, only ETH became accepted as collateral for opening CDPs.
In addition to that, CDPs facilitate the creation of Dai against collateral, held until they return the DAI. In another tweet of DeFi Saver, it stated, “MakerDAO has a mechanism in place that automatically liquidates CDPs once their collateralization ratio has dropped below 150%.”
Also, the firm gives an independent service. And this prevents the automatic CDP liquidation built on top of MakerDAO’s ecosystem. On the other hand, the company acknowledges that due to network congestion and transaction fees, the system failed to protect two monitored CDPs. And this have been liquidated during the process.
Nevertheless, the company said that it plans to compensate the tow affected users by the malfunction. It stated, “Although our automated protection is still in beta, our team is disappointed to have let some of our users down and we are willing to recuperate the losses suffered.” And they even invited the two CDPs to reach out to them.
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