The MakerDAO community has voted to enact an emergency governance proposal aimed at reinforcing DAI’s peg to the U.S. dollar.
A new set of parameter changes will be imposed on the Maker Protocol at 12:14 pm ET on March 13. The proposal was set in motion by Maker’s Risk Core Unit two days prior, with the aim of limiting the protocol’s exposure to “potentially impaired stablecoins.”
Maker Governance has enacted a set of parameter changes through the latest emergency vote to reinforce the DAI peg.
Submitted parameter changes are scheduled for deployment in 48 hours, on March 13th at 16:14 UTC. https://t.co/JDHXrDDsih
— Maker (@MakerDAO) March 11, 2023
The changes that will be incorporated include reducing the debt ceiling of liquidity providers to 0 DAI, bringing down daily minting limits from 950 million DAI to 250 million DAI on USDC on the PSM and increasing fee from 0% to 1% to discourage swapping of USDC for DAI.
The protocol also plans to reduce GUSD daily minting to 10 million DAI and eliminate all exposure to DeFi protocols Aave and Compound.
Eight of the ten top DEX liquidity pools use DAI or USDC as one of the pairs
Top USDC holders by address include Maker, MULTIPLE bridges, DEX pools, and lending markets pic.twitter.com/ryHQpAG2Mx
— Andrew T (@Blockanalia) March 11, 2023
Maker’s sense of urgency in deploying this proposal stems from the chaos that surrounded USDC following Circle disclosing it held $3.3 billion worth of its reserves with Silicon Valley Bank (SVB). USDC accounts for $4.12 billion worth of Maker’s Peg Stability Module (PSM) reserve assets.
When USDC briefly lost its peg to the U.S. dollar over the weekend, DAI soon followed suit. As blockchain researcher Eric Wall explained, this was a situation that was bound to happen because USDC is hardcoded as $1 on Maker.
So because USDC = $1 is hardcoded inside Maker, the price gap of DAI<>USD will be the same as USD<>USDC even though only 30% of the collateral is USDC because it’s free to arb the difference by putting USDC inside it and printing DAI as if USDC = $1. pic.twitter.com/wTeT2h1Xzb
— Eric Wall 🧙♂️ Taproot Wizard #2 (@ercwl) March 11, 2023
According to data from makerburn.com, at the time of writing, Maker’s PSM reserve assets stood at $4.4 billion, backing DAI at a 100% collateralization rate. However, CryptoQuant’s data shows that DAI’s supply increased by 1.4 billion in the last two days, and now sits at more than 6.35 billion.