There may be no need to recapitulate recent developments. In short, blood flows across markets. Ethereum experienced its worst day in history, dropping from $ 190 to $ 98 (-48%) in a single day.
Such a massive and rapid decline had and will still have its consequences in the so-called DeFi services, which work with ETH to secure stablecoins, loans and derivatives.
One impact is that the MakerDAO flagship DeFi project is now considering an emergency shutdown, ie the dissolution of its system and the payment of all deposits in ETH.
This is what has happened in recent days:
- with the onset of a major downturn, the Ethereum network became overwhelmed (people wanted to sell, close lever positions and repay loans), transaction fees went up record
- some MakerDAO debt positions have fallen below the necessary collateral level – according to the protocol, the stablecoin loan is to be collateralised at a minimum value of 150% (collateral is in the form of ETH)
- due to the congestion of the network, commercial robots did not manage to liquidate these positions, which fell below 100% collateral; some users have lost all collateral
- unsecured loans are now worth about $ 4 million
“DeFi Leader MakerDAO Weighs Emergency Shutdown Following ETH Price Drop” https://t.co/8XMIov1rOG— Dan Hedl (@danheld) March 12, 2020
MakerDAO now has two options: it will either print the governance token MKR (a kind of project’s digital stock) and pay for unsecured loans by selling the token, or it will dissolve the system. In the event of dissolution each DAI stablecoin is entitled to a $ 1 in ETH payment. The next steps are discussed in the official forum (registration required).