This is likely caused by high chain congestion on Ethereum and the inability to add collateral to positions on Maker. Gas prices on the Ethereum mainnet continued to increase in the early UTC hours Friday, with prices hitting 200 Gwei, according to data site Eth Gas Station.
MakerDAO’s emergency shutdown option – which was weighed by community members following the appearance of a $4 million debt bubble on the decentralized finance (DeFi) platform – will not pass at this time. If a shutdown was triggered by the Maker team, all dai stablecoins in circulation would convert to the underlying asset, ether (ETH).
A flaw in Maker’s system for generating collateralized debt positions (CDPs) caused some $4 million in ether to be swiped up for free. This was caused by network congestion on the Ethereum network and Maker’s pricing oracles failing to update quickly enough.
The amount of debt on the Maker platform continues to rise, however, hitting nearly $5.7 million as of press time Friday.
In an executive vote Friday, the Maker team is expected to address three pressing issues following Thursday’s turmoil: the dai peg, system debt and debt auctions. The 12 listed proposals MKR holders voted on were intended to normalize the platform’s operations.
Regardless of chain congestion, people with dai loans have poured ETH into the Maker protocol to shore up positions that could be undercollateralized if another drop in ETH’s value were to hit.
Those not able to get collateral into the system to cover their loans were forcefully liquidated by the protocol, however.
In an earlier vote Friday, the MakerDAO community voted to adjust the system’s risk parameters. Though the move comes in the wake of a dramatic 30 percent drop in ETH’s price, the changes were first discussed during a March 5 governance call.
The voting ballot was first issued Friday at 4:30 UTC and passed three hours later, according to the Maker Foundation. The vote can be executed 24 hours after passage, or 7:30 UTC on March 14.
The ballot’s content includes measures to increase the supply of dai on the market, which experienced a squeeze given market demand. Indeed, the demand for dai was reflected in the stablecoin’s interest rate reaching 22 percent Thursday on the second-largest DeFi platform, Compound.
Maker will also print new MKR governance tokens to refund CDPs that lost funds Thursday with the stated goal of returning dai to its dollar peg, according to a Maker Foundation blog post.
DeFi entrepreneur Ryan Berckmans described the action as a “haircut” for MKR holders in the spirit of the DeFi platform’s white paper.
“During a Debt Auction, MKR is minted by the system (increasing the amount of MKR in circulation), and then sold to bidders for Dai”, the white paper states.
Both investment firm Paradigm and venture-backed DeFi startup Dharma have announced intentions to help Maker through the debt crisis by purchasing the newly printed MKR.
“MKR buyers should prepare for sustained high gas prices, and downward pressure on ETH and MKR”, Berckmans said in a summary of the March 12 call. “We should plan for global markets to potentially crash further, which may correlate with further crypto drops.”
Overall, MakerDAO stakeholders are now focused on returning dai to its 1:1 peg with the U.S. dollar after investors rushed to the stablecoin as a safe haven.
The stablecoin shot as high as $1.22 per token yesterday and has since fallen to $0.98, according to CoinGecko. Data providers CoinMarketCap, CoinGecko and Messari all show dai’s price hitting an all-time high Thursday.
The peg was last discussed in the March 5 governance call.
“Major swings in ETH price are what is going to determine a lot of what happens with migration and with dai price”, Maker community member Vishesh said during the March 5 call.