How Maker DAO Could’ve Minimized the Harm of Black Thursday

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Note: The following brief is simply a thought exercise to determine ways that the Maker Foundation could have avoided (or softened) the impact of “Black Thursday.”

March 12, 2020 is a date known as “Black Thursday” within the crypto-community. On this date, during a global economic recession caused by the worsening of the COVID-19 pandemic, the Maker DAO ecosystem suffered massive CDP (Collateralized Debt Positions) contract liquidations that resulted in protocol losses of 5.67 million DAI. The historic liquidation was due to quick, and precipitous decline in Ether’s (ETH) value, the utility token of the Ethereum ecosystem. As ETH prices dropped, many token holders tried to sell their ETH at once in exchange for fiat currency and/or stablecoins, which then congested the Ethereum network and abruptly increased network transaction fees and wait times. As issued Dai became undercollateralized, many of the CDPs that issued the Dai liquidated, and there became an opportunity to win liquidation auctions with zero bids, which was 36% of all liquidations. $8.32 …

About

Robert Greenfield IV

CEO of Emerging Impact, Former Head of ConsenSys Social Impact, @Goldman Alum, @Cisco Alum, @TFA Alum, Activist, Intense Autodidact

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