Limits of Liquidation System in DeFi. User-hostile UI
Numerous DeFi platforms were hit hard by the COVID-19 pandemic in Februry 2020, primarily due to sudden cryptocurrency market crash. In particular, one of DeFi leading projects, MakerDAO was a prime example. At that time, the value of Ethereum dropped significantly and MakerDAO’s stablecoin DAI was linked to it. So the Maker platform automatically liquidated ETH, which was deposited as collateral, but the sudden influx of liquidation triggered the price of gas within the Ethereum network being soared and liquidation system down. Simultaneously, the price of DAI was surged due to its short supply caused by transaction delay (=network overload), as the platform users attempted at replacing ETH with stablecoin
DAI. What we can learn from the event described above is an alternative trading function should promptly be activated in such adverse events, and in this case, a centralized clearing house can be a solution for supporting exchanges between stablecoins.
While most DeFi projects focus more on penetration rate in the market, people, in particular, who are not farmiliar with cryptocurrency, experience difficulties in understanding DApp and accessing to it. This is a problem applicable not only to DeFi service but also to blockchain DApp in general. With convenient UI mounted on the system, the DeFi market will see the rise of new users and this will contribute to expanding the market and increasing liquidity after all.
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