50.3 F
New York
Sunday, September 20, 2020

-

Home Tech Crypto The MakerDAO Auction Is Happening, Here's What to Expect

The MakerDAO Auction Is Happening, Here’s What to Expect

Document Analysis NLP IA

956
WORDS

WORDS
4:46
Reading Time

Reading Time
neutral
sentiment

Sentiment0.071240653286108
objective
redaction

Subjectivity0.48854388036206
probably it's an affirmation
Affirmation0.39490445859873

Highlights

RELEVANT
FREQ, RAKE or TFIDF
Entity
ORG
Entity
PERSON
Entity
PRODUCT
Entity
OTHER
Key Concepts (and relevance score)

Summary (IA Generated)

.

The MakerDAO (MKR) community has locked in an auction to cover a multi-million dollar hole in DAI collateral after the sudden Ethereum (ETH) price crash on March 12.

Scheduled for 10:28 AM EST on March 19, the system will auction newly minted MKR in exchange for DAI.

The proceeds from the sale will be used to recapitalize the system and compensate the losses suffered by the borrowers who saw their Ethereum collateral auctioned off for zero DAI.

The loss led to active discussion in the MakerDAO governance forums on whether the borrowers needed to be compensated for the unfair liquidation.

Active discussion in the Maker communityThe liquidation mechanism is one of the main ways that DAI maintains its peg with the U.S. dollar.

The Maker community is not entirely united in seeing the loss as a major issue.

One community member argues that as long as DAI is trading above its peg, the under-capitalization can be maintained because it would naturally cause DAI to lose, rather than gain, value.

Other community members believe that the DAI borrowers whose collateral was liquidated on March 12 should not be compensated for their loss.

It is important to note that a MakerDAO liquidation does not entail the loss of the entirety of the user’s capital.

If the value of the Ethereum collateral falls below 150%, “Keepers” can trigger an auction for the value of the outstanding debt, plus a 13% liquidation fee.

Through the zero DAI auctions, however, the users lost an extra 21% of their capital that was supposed to be returned.

Some community members argued that the loss is not severe enough to warrant a refund, and that users were aware of the risks in participating in the Maker system.

The “PR impact” of zero-DAI liquidations was also mentioned as a reason for compensating MakeDAO’s users.

An auction to shift the losses to the stakeholdersFollowing the discussion, the Maker community locked in a proposal to auction newly-minted MKR in exchange for DAI, which should cover the hole in collateralization.

Selling MKR for DAI would thus compensate the users, while diluting existing stakeholders — effectively socializing the individual losses.

While the community is still debating the specific parameters of the auction, the initial bid price has been set at 200 DAI, against a market price of $199 at press time.

“We believe MakerDAO and Dai are extremely important to the DeFi ecosystem.


129FansLike
3FollowersFollow
14FollowersFollow