The MakerDAO Risk Core Unit, a key group within the MakerDAO governance system, submitted an urgent request today to change collateral parameters for the DAOs stablecoin, DAI.
Primoz, a member of the Risk Core Unit team, posted the request to the MakerDAO Forum.
“In light of recent events in the crypto ecosystem and surrounding uncertainty regarding financial stability and asset liquidity of various entities and their possible relations with token governed protocols, we are proposing following temporary emergency measures”
The message proposed that the debt ceiling for MATIC, LINK, YFI, renBTC vaults should be reduced by the following amounts:
- MATIC: From 20M to 10M (50%)
- LINK: From 25M to 5M (80%)
- YFI: From 10M to 3M (70%)
- renBTC: From 10M to 0 (100%)
A separate, earlier proposal also suggested that the debt ceiling for MANA be lowered from 10M to 3M.
If the proposal passes, it will reduce the amount of coins that can be used as collateral to mint new DAI.
Some of the coins on this list are so close to the new debt ceiling that they will immediately hit it or be close to hitting it should the proposal pass. For example, there is currently $14.2M worth of MATIC backing DAI, but the proposal would lower the debt ceiling for MATIC to $10 million. This would mean that users would no longer be able to mint new DAI by depositing MATIC.
In the proposal, Primoz sought to calm users and express that the changes may only be temporary:
“When the situation becomes clearer and the environment less risky, we (@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.”
Over the past few days, the crypto community has been rocked by news that FTX, the world’s third-largest crypto exchange by volume, did not have enough liquidity to handle all customer withdrawals. This event started a contagion that has spread through the crypto market, leading many coins to have huge losses.
MakerDAO has turned out to be the latest victim of this contagion. As the value of collateral backing DAI has fallen, debt levels have risen too high for the comfort of the Risk Core Unit team. This may lead to lower debt ceilings and increasing frustration for borrowers who wish to mint new DAI.