- The value of DAI, a stablecoin tied to the U.S. dollar, fell to an all-time low of $0.88.
- The stablecoin issuer has recommended similar measures for DeFi protocols.
MakerDAO has developed a contingency strategy to shield its native stablecoin DAI from additional exposure to potentially unstable stablecoins. Amidst the volatility that has plagued the crypto market over the last twenty-four hours. Especially with USDC depegging from its $1 value. And mounting fears over the degree to which it might affect other cryptocurrencies.
An official post on the MakerDAO forum said that the corporation required an urgent executive proposal to reduce risks to its protocol. The value of DAI, a stablecoin tied to the U.S. dollar, fell to an all-time low of $0.88, a decline of almost 8%. However, it is now trading at $0.95 at the time of writing as per CMC.
Maker said on March 10 that it has a large number of collaterals that were “exposed to USDC tail risk.” Due to the unprecedented de-pegging of the USD Coin (USDC) that began on March 10. The DAO’s DAI stablecoin is now backed by more than $3.1 billion USDC in collateral.
Multiple Revisions Proposed
Maker proposes initially reducing the maximum amount of debt on liquidity provider collaterals to 0 DAI. In the next step, Maker plans to reduce the USDC peg stability mechanism’s daily minting constraints from 950 million DAI to 250 million DAI while increasing the fee from 0% to 1%. The proposal, if adopted, would reduce the daily minting cap for another stablecoin module dubbed GUSD from 50 million DAI to 10 million DAI.
MakerDAO claims the Paxos module is more secure since it is backed by a more robust reserve asset than competing centralized stablecoins, most of which are backed by U.S. Treasury bills, insured bank deposits, or privately insured bank deposits.
To minimize bad debts and possible bank runs, the stablecoin issuer has recommended similar measures for DeFi protocols.
