The past week has been volatile with one of the most massive price crashes in the past 7 years. Total lock-up value in DeFi plunged by 72.3% from $889.2M to $246.0M in 12 hours.
The breath-taking speed of price slash led to liquidations of a significant number of collaterals for defaulted loans. The combination of thin liquidity, high uncertainty, price-feed errors, traffic triggered the meltdown of confidence in crypto for many.
MakerDAO, experienced an accidental vault liquidation with zero DAI bids, resulting in a net loss of $4.5M dollar. It will launch an MKR auction to cover outstanding bad debt for the first time.
Liquidation reached a single-day volume of all-time-high on 12 March, with collaterals of $23.3M liquidated in 24 hours. MakerDAO ranked as number one with a market share of 43.9%, following by Compound with 26.7% and dYdX with 19.3%. Lendf.Me accounted for 4% in terms of total liquidated collaterals.
Sparked panic-buying of stablecoins pushed up the OTC price of USDT by 12%, as well as skyrocket rates of USDT and DAI on almost all DeFi platforms.
Stablecoin liquidity was drained in almost all DEXes, witnessed by an increase of 465% in trading volume from the previous day.
Resilience Tested — dForce
dForce’s lending protocol Lendf.Me operated solidly during the market meltdown despite comparable drop of locked value and liquidity drain.
Locked value on Lendf.Me was down from $15.81M to $11.16M on 12 March, and jumped up to $14.2M on the next day.
On March 12, the total liquidations on Lendf.Me amounted to around $1m, after MakerDAO, Compound and dYdX.
Liquidation Explained: Borrowers need maintain a minimum of 125% collateral cover ratio, if it fell below 125% and there was no top-up of collateral or repayment, liquidation would be open to anyone (accessible through Monitor). There were 10 liquidators participated in the liquidation process during Mar 11~13, with one liquidation bot accounted for 111 liquidations with a potential profit of $60K.
Price Feed (Oracle)
Like many other DeFi projects, we aggregate real-time price from a group of exchanges. We mediate those price feeds from various sources and publish the mediated one on-chain periodically.
· 83 price feeds on 11 March;
· 209 price feeds on 12 March;
· 120 price feeds on 13 March.
Panic amid the market crash drained liquidity of some of the stablecoin pools, particularly the USDT pool. Below we have outlined the liquidity (available amount to withdraw) of each asset for the period of Mar 11 ~ 13. USDT liquidity dropped to $39.5K (utilization was closed to 100%) on 12 March but soon recovered to $1.35M on 13 March.
Ultra-high Utilization Pushes Up Interest Rates
The liquidity drain led to 99.99% utilization of USDT pool, with both saving rate and borrowing rate spiking to 25.7%.
The high rate incentivized liquidity supply and repayment of USDT loans, which ultimately restored the liquidity and rates back to normal. Now Lendf.Me offered 4.60% on USDT savings versus 6.30% on borrowings, as of 19 March.
dForce Lending Protocol — Lendf.Me
Lendf.Me is featured as a trust-minimized, non-custodian and permission-less lending protocol. It is now the global #5 lending protocol in terms of lock-up value and the following mechanism attributes to our resilience against recent market turmoils:
1) Careful selection of collaterals: we currently support the mostly adopted stablecoins including USDx, USDT, USDC, PAX, TUSD and main assets including ETH and BTC of ERC standards (imBTC launched by imToken, HBTC launched by Huobi and WBTC). We remain very selective with collaterals with the best liquidity and quality.
2) Price oracle: like many other DeFi projects, we aggregate real-time price from a group of exchanges. We mediate those price feeds from various sources and publish the mediated one on-chain periodically, which effectively mitigate price-feed failures due to malfunction and network congestion.
3) Fully open and accessible liquidation process: The liquidation is 100% open and fully accessible with user-friendly interface and API support. Most of the liquation on Lendf.Me were done by external liquidation bots and it was extremely efficient and had very little back-log even during unprecedented violative turmoil.
4) Incentivized liquidity rebalancing: interest rates are algorithmically adjusted based on market supply and demands which helps to improve liquidity effectively — this has been evidenced by the robustness and resilience of Lendf.Me during the turmoil;
5) Efficient interest rate model: the interest rate model set for the best interests of both assets supplier and borrower, please access FAQ to view details；
6) In addition, we have introduced a couple of easy-to-use toolkits for users to monitor supply/borrow status.
You can add a bot (@LendfMeMonitor_bot) on Telegram to monitor accounts of your interest in real time:
Real-time borrowing information including shortfall amount, collateralization rate, and etc can be viewed from Monitor:
Join us for an online discussion! We’d love to hear your voice!