MakerDAO Makes Urgent Changes To DAI’s Collateral Parameters
Stablecoin issuer MakerDAO has proposed changes to reduce the debt ceiling for crypto assets that can be promised as collateral when minting new DAI tokens. The proposal currently up for governance vote was considered following the fall of the crypto exchange FTX.
MakerDAO Changes DAI Collateral Parameters
Taking current market events into account, MakerDAO – decentralized exchange and issuer of the DAI stablecoin – is making urgent changes to the collateral parameters for minting its dollar-pegged cryptocurrency. In a proposal submitted to the decentralized autonomous organization (DAO) by the Risk Core Unit – a security group within MakerDAO, the company has been advised to reduce the debt ceiling for certain crypto assets that’s used as collateral to mint new DAI.
The proposal suggests reducing the debt ceiling for MATIC (Polygon), LINK (Chainlink), YFI (Yearn Finance), MANA (Decentraland), and renBTC. Collateral allocation for MATIC will be reduced from 20 million to 10 million, LINK from 25 million to 5 million, YFI from 10 million to 3 million, ten BTC from 10 million to zero, and MANA from 10 million to 3 million. Risk Core Unit has submitted the proposal for a governance vote, which if passed will reduce the number of tokens that can be promised by users as collateral to mint new DAI.
Maker is making changes following the collapse of the cryptocurrency exchange FTX. Earlier this month the exchange which was once the world’s third-largest by trading volume faced liquidity issues after mishandling customer funds. The company with liabilities of over $8 billion has since filed for bankruptcy in the United States and the Bahamas, where it is registered.
Risk Core Unit Team member Primoz has assured customers that the changes are only temporary and they need not worry.
“When the situation becomes clearer and the environment less risky, we at Risk Core Unit or either MOMC will propose further parameter changes to adjust parameters based on the future state. While we do not necessarily want current positions to unwind, we want to limit further possible exposure.”
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The drop in value of tokens backing DAI due to recent market events has led to the debt ceiling for these assets rising too high. With its collateral parameter change, Maker’s Risk Core Unit team is playing it safe despite the frustration of customers who wish to mint new DAI.
In September, Coinbase Prime – an institutional crypto brokerage – agreed to become the primary custodian for Maker’s $1.6 billion worth of USDC reserves. The agreement was made official after a proposal submitted for vote to the decentralized exchange’s DAO was passed. According to the proposal, MakerDAO community members will be eligible to earn 1.5% in rewards on the USDC they hold. The DeFi lender will also issue a USDC loan worth $500 million to Coinbase as part of the agreement. This loan will be collateralized with Bitcoin (BTC) and Ether (ETH) which will be under Maker’s custody.
“This additional monthly revenue generated through this deal enables Maker to further advance its overarching mission to create a global, trustless financial future built on decentralized rails,” said Jennifer Senhaji, head of growth and business development at MakerDAO.
Lately, the decentralized crypto firm has been making moves to instill trust among customers by legitimizing its activities. Recent collapse of FTX, Celsius, Luna and Voyager Digital have created fear and uncertainty among mainstream investors regarding the industry. Maker’s decision to change its operational model is much welcome and will make a big difference among users.
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