Almost one-third of the entire Bitcoin supply is secured with a feature that gained adoption after the Mt. Gox heist.
Almost six million Bitcoins (BTC) are stored in multi-signature wallets — nearly one-third of the total supply.
Prevents ‘Exit scams’
Bitcoin is generally secured with a combination of a public and private key. In order to transact on the Bitcoin network, a user needs to sign each transaction with their private key. This works fine in most use cases, but there are situations where this setup is not ideal.
For example, let’s say the founder of a crypto exchange secures all of the firm’s assets with their private key. This may lead to several problematic situations: what happens if a founder suddenly dies, gets hacked, or decides to engage in an ‘exit scam’? In all of those situations, the exchange would go belly up and users would lose their funds.
In order to alleviate these issues, a soft fork was introduced in 2012 that enabled the use of multi-signature wallets. Bitcoins could now be secured with multiple signatures, where X out of N signatures would be required to spend it. This means that wallets could now be controlled by multiple users, without any one user having the ability to spend the coins on their own.
Number & Percentage of Bitcoins Stored in Multi-Signature Wallets. Source: txstats.
Mt. Gox spurred adoption
The same exchange founder could secure all the deposits with five signatures and require at least three signatures for a transaction. These five signatures could belong to the various company executives. They could even delegate one or more of the signatures to a trusted third party.
We observe that mass adoption of this feature only began in 2015. There is a simple explanation for this — Mt. Gox. After the notorious hack, the community realized that a decentralized system should not rely on a single point of failure.
RIF on Chain (ROC) offers a fast and secure platform for transacting RIF-backed products, as well as an opportunity for RIF token holders to generate passive income.
The RIF on Chain Defi platform will principally consist of three main assets that interact with each other, which have been developed to serve different purposes depending on users’ needs. These include: (i) the RIF Dollar (RDOC), an asset-backed stablecoin pegged to the US Dollar and fully collateralized with RIF tokens; (ii) the RIFpro (RIFP) token, the cornerstone of the ecosystem enabling the minting of RDOC and RIFX through a token staking model; and (iii) RIFX, a leveraged trading asset with exposure to movements in the RIF token price.
The RIF Dollar stablecoin (RDOC) would constitute a crypto-collateralized stablecoin on the basis that it uses the RIF token as collateral. What makes this stablecoin different from other crypto-collateralized stablecoins, is the mechanism through which RDOC is issued. RDOC stablecoins will be minted whenever there is a certain amount of RIFpro (RIFP) staked in the platform. The essence of RIFP is to allow RIF token holders to generate a passive income, principally from fees generated by users interacting with the platform, rather than as a result of RIFP being a leveraged product by design.
Here is a brief overview of the main characteristics for each of these tokens:
RIF DOLLAR (RDOC)
The RDOC is a stablecoin pegged 1:1 to the US Dollar and guaranteed by a smart contract. Users will be able to redeem their full RDOC position at contract expiration or partially during the lifespan of the contract depending on the availability of redeemable RDOC stablecoins.
Another important feature about RDOC is that it is fully collateralized by RIF tokens, and users can acquire them directly in the platform without needing to provide any collateral or CDP like other DeFi platforms.
The RDOC token can be transferred among users and can be used for purchasing services and products, specifically dApps blockchain products that will be released on the Rif Marketplace. Another characteristic of the token is that it can be stored in any compatible hardware wallet.
RIFP is a token that mirrors the RIF volatility, plus a small amount of leverage that it receives from the RDOC stablecoins. The RIFP token will benefit from a percentage of the transaction fees charged by the ROC platform to the users of RDOC and to the traders of RIFX. This is why the RIFP is a suitable token for RIF holders who want to earn a passive income with a minimum leverage on its RIF token position.
RIFX is a RIF leverage decentralized long position. Based on an automated smart contract that renews every 30 days, the product has a leverage factor of 2X at the very beginning of its lifespan and a variable leverage afterwards based upon certain variables such as the price of RIF token and the amount of RDOC stablecoins in the ROC platform. Users must be aware of the risks associated with trading a leverage asset and should understand that their positions might be liquidated. The ROC platform, in this current version, does not have a Margin Call notification. The RIFX product can be sold at any time without needing to wait until expiration like in the RDOC stablecoins.
Will 2020 be the year for DeFi? Looks like it is going to happen and RSK, the smart contract platform on top of Bitcoin, is making a great contribution to the ecosystem.
The on-chain activity for stablecoins has increased 800% in the last 12 months.
The on-chain activity for stablecoins has increased 800% in the last 12 months according to market intelligence firm TokenAnalyst.
This growth is not surprising considering the overall growth of the stablecoin niche. The combined market cap for all stablecoins ranks third in size behind Bitcoin (BTC) and Ether (ETH) and ahead of XRP (XRP).
Over the past year, $290 billion of stablecoins were moved on-chain — in March alone $50.9 billion in value was transferred versus $6.2 billion in April 2019.
Dai is most DeFi
Despite the growth of the DeFi industry, more than half of the on-chain activity involves centralized exchanges. In fact, exchange-related activity outranks DeFi five to one.
Of the three stablecoins analyzed Tether (USDT), USDC (USDC) and Dai (Dai), the latter is by far the most “decentralized” with 88% of its on-chain activity qualifying as DeFi. This is because Dai itself is built on a DeFi protocol. On the other hand, 62% of Tether’s activity involves centralized exchanges.
The availability of a variety of stablecoins is useful for crypto investors as it provides a “parking” mechanism to shield their wealth from market volatility. Cashing out is an alternative strategy, but with stablecoins, the investor does not need to exit and re-enter the crypto world which can be inconvenient and incur additional costs.
With both the Dai stablecoin and the DeFi space, lately, exhibiting fragility, some degree of centralization may not prove to be such a bad thing after all.
The uncertain market situation seems to strengthen the stablecoins market cap.
After the tensions on Monday, which saw the US WTI oil price close in negative, even yesterday, after the closing of the May contract, tensions shifted towards the June futures which in a few hours fell below $13.
The tensions are increasing more and more and, if they continue as feared in the coming weeks, this will affect other financial market assets and could also involve other commodities.
These tensions have also put the stock markets in the US and Europe under further pressure yesterday, not only because of what is happening with US crude oil but also because of the problems that persist in the management of the economy.
The Covid crisis seems to have been almost a pretext to blow up what had been boiling for several months, if not years.
In such a tense period, people and even non-professional investors are resorting to stability of their capital, so much so that gold has reached the highest in the last 8 years, rising last week to 1,780 dollars recorded on April 14th.
Gold has also seen a decline in recent days with returns below $1,700, but it remains the main safe-haven asset.
In addition to gold, investors are also looking for protection in fiat currencies, which seems to be the fastest method in these cases. This is why the strongest currency in the world is used.
As a result, the dollar strengthens but at the same time its liquidity decreases. Other assets may find a reason to grow stronger within such a context. Stablecoins, for example, in the last 2-3 weeks see the total market cap in their sector exceed $9 billion, an absolute record.
The ease of moving fiat currencies in the form of stablecoins in this period of high tensions finds more and more application and this makes them exceed the 9 billion capitalization, with Tether that considering yesterday’s record, holds 84% of the market cap with its 7 billion dollars.
Today, after the declines of the last few days, sees the green signs return again. The positive signs prevail with 70% of cryptocurrencies in green, not real rises but a reaction from yesterday’s setbacks.
Among the top 10, the red and green signs are balancing out. Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) are in negative territory, with moderate declines that do not go beyond 0.5%, while in positive territory there’s Tezos (XTZ) which rises above 1%.
Enjin Coin (ENJ) continues to perform well and today continues to climb with a jump of over 4%. Among the top three of the top 100 there are also DigiByte (DGB) with +8% and Status (SNT) with an increase of about 5%.
Today’s increases allow the total capitalization to return to close to 200 billion dollars.
The dominance of Bitcoin, Ethereum and Ripple remain unchanged from the levels of the last 48 hours.
Bitcoin (BTC) price
Bitcoin returns to react to the bearish movement that has characterized the prices of the last 3 days and today tries to recover the $7,000. For Bitcoin, from a bullish point of view, it is necessary to go beyond the $7,150 as soon as possible.
In the case of a violation of yesterday’s lows and specifically of the 6,750 dollars, there would be room to revise the 6,500 and then in the event of a further sinking begin to evaluate the possibility of closing the current monthly cycle with a greater degree of depth than assumed and with a maximum extension that must not go beyond $5,900, otherwise, it would open a delicate and dangerous phase a few days after the halving.
Ethereum remains within the bullish channel that started with the lows of March 16th and that so far draws higher lows and highs in a monthly context.
Ethereum today tries to recover the $175 threshold, former resistance area until last week. For ETH, it is necessary in the coming days to consider closing the monthly cycle around $155-160.
In case this level of support for ETH is held, it will be a positive and upward signal. A possible breakage will have to hold the breakage of the next support identified in the $145 area.
Below this level, the current bullish structure present since mid-March would begin to give a bearish signal of the possibility of a new trend change in the medium term.
Stablecoin balances on various crypto exchanges have surpassed all-time highs, while Bitcoin volume has dipped—suggesting that crypto investors are biding their time and waiting for the right moment to resume buying crypto.
According to a report by crypto exchange Luno (based on data from Arcane Research), there is currently over $2 billion worth of stablecoins “waiting on the sideline for the buy signal” at exchanges.
At the same time, following a small uptick two weeks ago, Bitcoin trading volume has dropped to its lowest level in over a month—returning to levels seen before the market crash in March.
Traders bide their time
The Bitcoin market’s 30-day volatility has dropped to around 4.3%; prior to the market crash, it ranged around 2-3%. With only half of Bitcoin holders thinking that the cryptocurrency’s price will go up, it appears that traders are biding their time and waiting for the price to dip before buying in.
There’s been an influx of new money into the market in recent days, with Coinbase CEO Brian Armstrong pointing to a sharp spike in deposits that amounted to exactly $1,200 each—the same amount that Americans recently received in the form of coronavirus stimulus checks from the US government.
While it’s not clear what those Coinbase users have bought on the exchange, it’s clear they’re looking to purchase some form of cryptocurrency. With crypto prices dipping alongside oil, they may have found that buy signal they’re looking for.
Huobi’s HUSD minting amount of $4.2 million coincides with April 20 day.
Today, April 20, Huobi has reportedly minted some 4,200,000 HUSD worth $4.2 million.
According to data published by Whale Alert, this minting occurred around 7:30 GMT. Social media reactions saw users note this number’s similarities to today’s date — the 20th day of the fourth month.
HUSD has been mostly inactive since launch
The stablecoin has not seen much trading volume since its launch in 2018, but it was reactivated on February 7 of this year, and we’ve seen some minting movements from Huobi since then.
Huobi minted around 2,013,945 HUSD on that day. It minted around 1,950,000 HUSD the very next day, February 8. Then on February 14, another minting of 1,090,075 HUSD took place.
As of press time, Huobi’s stablecoin has a reported market cap of $148 million, with a daily trading volume of approximately $20 million. This is well below Binance’s BUSD market cap of $203 million, which also sees twice the trading volume of HUSD.
Promotional minting or just a coincidence?
The HUSD project was announced at the end of 2018 as Huobi’s attempt to win a piece of the stablecoin cake. But sometime in 2019, Huobi’s stablecoin stopped minting it.
This latest minting might be a promotional move, but we can’t officially confirm this speculation. Cointelegraph contacted a Huobi representative for details and this article will be updated accordingly should a response come in.
Huobi DM announced a new partial liquidation feature on its exchange, aimed at decreasing customers’ risk.
Huobi’s derivatives trading platform, Huobi DM, has announced a new ‘partial liquidation’ feature that aims to limit trading losses.
Sudden market swings can immediately liquidate highly leveraged positions and cause extensive user losses, as seen during the last week’s Bitcoin price crash.
The platform’s new liquidation mechanism will jump into action when markets face turbulence to mitigate the impact on traders, Huobi said in a statement.
Crazy market times cause issues
Amid recent coronavirus fears and market uncertainty in stocks and crypto, asset prices have seen violent swings. Between March 12 and 13, Bitcoin dropped more than 50% in value before bouncing off the bottom.
During the crash BitMEX saw liquidations top half a billion dollars in an hour. It also went offline, which some users claim resulted in unnecessary liquidations. It blamed denial-of-service (DDoS), attacks as the culprit.
Huobi’s platform saw around $27.45 million in liquidations in a few hours during the crash.
After a stark price swing, liquidation occurs when traders do not hold enough capital in the exchange on which they are trading, resulting in trading position closure. Huobi DM’s new adjustment aims to improve the all-or-nothing liquidation mechanism that wipes out funds all at once.
Huobi DM looks at a different approach
Huobi DM’s new liquidation mechanism offers the option for partial liquidation. The mechanism gradually reduces users’ positions rather than liquidating them in full in a single event. Huobi DM explained:
“With the new mechanism, the system will automatically start liquidating a user’s positions in stages—at predetermined margin ratios determined by the user’s calculated exposure—until the margin ratio reaches above zero. The liquidation process also includes a circuit breaker function that halts liquidation when large or unusual deviations between the liquidation price and market price are detected.”
Huobi DM said the new feature applies to all assets and leverages on the derivatives exchange. Additionally, the outfit decreased its maintenance margin ratio, as well as updated its system’s firmware.
Cointelegraph reached out to Huobi for additional details. This article will be updated accordingly should a response come in.
The massive crypto sell-off on 12 March saw the price of ETH fall 43% from $194 to $111 – its largest ever loss in a single day.
This sell-off triggered unintended consequences for the MakerDAO ecosystem. Dubbed “Black Thursday”, this sent the Maker system into chaos as $4.5 million worth of DAI was left unbacked by any collateral, and users lost millions.
News outlets and industry commentators have been reporting on these events, but a clear account is hard to come by. Many market observers have been left asking: what really happened to MakerDAO?
Ethereum Network Overwhelmed, Gas Prices Increased – On 12 March, the Ethereum network was overwhelmed by demand as the price rapidly plummeted. The transaction queue grew as network capacity was reached, and gas prices shot up by an order of magnitude.
Price Oracles Failed – Due to uncharacteristically high gas prices, price oracles including the Maker ‘Medianizer’ failed to update their feeds.
CDP Liquidations Lagged, Then Were Triggered En Masse – When the Medianizer feed was updated, the reported price instantly decreased by over 20%, causing many CDPs to be liquidated immediately.
ETH Was Sold For Free Through Maker – Again due to high gas fees and network congestion, when the ETH collateral in these CDPs was auctioned off, many bids did not get through. This allowed some liquidators to win these auctions with bids of zero DAI by paying high gas fees, extracting over $8 million worth of ETH essentially for free.
CDP Owners Left With Millions In Losses – This exploit means that over $4.5 million of DAI in the MakerDAO system is now unbacked. In addition, users whose CDPs were liquidated (and whose ETH was sold to the zero-bid liquidator) lost 100% of their collateral, resulting in millions of dollars of losses for the DeFi community.
1 – The Ethereum Network Was Overwhelmed As The Price Fell
As the price of cryptoassets across the market began to plummet early on March 12, on-chain volumes spiked massively, and ETH deposits to exchanges hiked as users scrambled to react to falling prices across the market.
At the same time, many Ethereum dapps saw their highest ever daily activity. This, combined with increasing deposits to exchanges, overwhelmed the network.
The mean gas price for the day spiked over 6x to almost 80 Gwei, with mean hourly prices reaching almost 200 Gwei (according to Glassnode’s hourly data).
2 – ETH Price Oracles Failed
The increase in on-chain activity was especially significant for DeFi apps, which were overwhelmed by the radical spike in demand.
One of the most notable consequences was caused by the failure of pricing oracles offered by projects such as MakerDAO and Chainlink. With gas prices so high and so many transactions in the queue, these oracles were unable to update their price feeds quickly enough to keep up with the rapidly decreasing price of ETH.
Chainlink’s ETH price feed stalled for hours as it waited for price updates to make their way through the queue of transactions. The Maker ‘Medianizer’ oracle also provided radically incorrect ETH price data, giving a price of $166 when the real price was around $130.
3 – CDP Liquidations Lagged, Then Were Triggered En Masse
Positively, this gave some network participants time to top up or pay off their Maker CDPs, which would otherwise have been liquidated. By paying high gas fees, they were able to rescue their CDPs before the Maker price oracle was updated on-chain.
However, it also meant that when the price provided by the oracle was finally updated, many CDPs were suddenly liquidated en masse.
CDP automation systems such as DeFi Saver were unable to rescue many users’ CDPs, as the price instantly dropped from above their configured minimums to below a 150% collateralization ratio. These users therefore had their CDPs liquidated despite having put safeguards in place, as their safeguards relied on accurate and regularly updated price data.
Further, some CDPs whose liquidations hadn’t completed (i.e. their collateral had not yet been purchased) were nonetheless liquidated even after the ETH price went back up, because price oracles were again too slow to reflect this change.
4 – ETH Was Sold For Free Through Maker
The tumbling ETH prices and slow oracles on 12 March led to a massive amount of Maker CDP liquidations, but high gas fees on Ethereum led to an even more dire situation for the MakerDAO ecosystem.
Refresher – How CDP liquidations work: When Maker CDPs (“vaults”) are liquidated, the collateral they contain gets auctioned off by the Maker system to pay back the CDP owner’s debt and the 13% liquidation penalty. Entities who purchase this collateral (“Keepers”) can make bids for bundles of 50 ETH, with auctions open for a limited amount of time, and ETH collateral selling for slightly less than market value.
The purpose of these auctions is to raise enough DAI to pay back the CDP debt. However, because gas prices on Ethereum on 12 March were so high and the queue was so long, bids which offered “regular” gas prices weren’t being processed fast enough.
Taking advantage of this network delay, a liquidator (likely a bot) was able to win these auctions with bids of zero DAI, essentially buying bundles of 50 ETH for free (aside from the comparatively nominal gas fee they paid to front-run the auctions). Several copycat liquidators also joined in on this exploit after noticing these strange auctions.
Over $8 million in ETH was liquidated for zero DAI by these few opportunists exploiting vulnerabilities in the MakerDAO auction system.
This resulted in a net loss for the MakerDAO system, as the auctions did not raise the amount of DAI required to pay back the attached CDP debt. Because of this anomaly, at least $4.5 million (at the time) worth of DAI was left unbacked by any collateral.
5 – CDP Owners Left With Millions In Losses
Not only did this exploit leave the Maker system undercollateralized, but the users whose CDPs were liquidated lost all of the additional collateral in their CDPs.
Because CDPs are overcollateralized by default, these users should have received the total ETH value of their CDP minus their debt and the 13% liquidation penalty. However, because their ETH collateral was sold for zero DAI, they were left with nothing.
Users took to Reddit to ask questions:
As u/BitBurst noted, many MakerDAO users lost their life savings. The largest liquidated CDP lost around 35,000 ETH, equivalent to ~$4 million USD at current prices. Community members are calling for MakerDAO to rectify the situation.
Patching the System
Shortly after the exploit occurred, MakerDAO conducted a vote on how to prevent this from happening again. New system parameters have increased the maximum lot size from 50 to 500 ETH and increased the duration of auctions. Further solutions such as minimum bid amounts on auctions are also being explored.
Re-Collateralization of DAI
The Maker community vetoed an Emergency Shutdown in favor of less drastic measures. Instead, as per the Maker whitepaper, the main way in which the system will be re-collateralized is via the printing and auctioning of new MKR tokens:
If the Collateral Auction does not raise enough Dai to cover the Vault’s outstanding obligation, the deficit is converted into Protocol debt. Protocol debt is covered by the Dai in the Maker Buffer. If there is not enough Dai in the Buffer, the Protocol triggers a Debt Auction. During a Debt Auction, MKR is minted by the system (increasing the amount of MKR in circulation), and then sold to bidders for Dai.
This sale mechanism will dilute existing MKR holders, considered fair “punishment” for their failure to maintain steady backing for DAI via good protocol governance.
The community is also proposing a reduction of the DSR (Dai Savings Rate) and the Global Stability Fee, in order to bring the DAI price closer to its 1 USD peg.
Redress for Liquidated CDP Owners?
At this time, it is unclear whether further MKR tokens will be minted and sold in order to cover the losses suffered by CDP owners who were liquidated. Many community members are calling for this as an “act of good faith”, stating that it will also help the protocol’s reputation in the long run.
Other community members have pointed out the irony of Maker’s response to the event, stating that it “sounds a lot like the traditional system DeFi was supposed to disrupt.”
The system of “the richest few (MKR holders) must apply and adjust monetary policy to decide the fate of the many (DAI users)” does seem eerily similar to the way financial systems work in the traditional world, and users of the MakerDAO ecosystem are concerned for its future.
What Does This Mean For MKR?
To find out what this series of events means for the price of the MKR token, read our follow-up analysis:
Subscribe to Glassnode Insights below for updates.
Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.
On Thursday March 12, 2020, the price of Ether (ETH) dropped over 30% in about 24 hours. The result sent chain reaction rippling through DeFi in an event many will likely come to refer to as Black Thursday. DeFi users rushed to make transactions like trading on DEXes, paying off debts, bolstering collateral ratio, etc. The increased activity led to record-setting high gas prices at times exceeding 200 gwei.
If you’re unfamiliar with how gas prices work, think of it as an auction for the limited space in each block. Users desperate to get their transaction through start to outbid each other to get their transactions completed in a timely manner. And then, the ensuing “bidding wars” drive up gas prices and subsequently cause low-priced transactions to be stuck until things settle down. The bottom line is that the increased volume put a lot of stress on DeFi smart contracts along with the entire Ethereum network.So we’ve decided to put together this status update to provide context for those unaware who may panic at the sight of the charts lately.
Don’t panic. All is not lost and DeFi endured the test.
I think it’s worth taking a moment to say: there are safety measures in place for a reason. When you install fire alarms and safety systems you hope you never need to use them, but know that there could always come a day when you have to. And if your home catches on fire, you don’t abandon the concept of living in homes altogether. You rebuild your home and this time you build it bit safer and better overall. We, as a community, have been tested before and have only grown stronger for these trials. A decentralized financial market is a market worth fighting for and the truth is… DeFi remains one of the most exciting and innovative spaces on this planet and will only continue to grow and evolve despite the occasional bump in the road.
High levels of network congestion affected the entire Ethereum network so we’ll only be addressing some of the more notable ways DeFi projects were affected by recent events.
While the exact issue is still under investigation, the dramatic increase in gas prices caused Maker’s price feed oracle to remain stuck at ~$166 despite the market dipping almost 15% lower at times. High gas prices also affected Keeper bots, preventing many from liquidating undercollateralized loans. Unfortunately, some Keepers were able to bid on and purchase collateral ETH for 0 DAI. And, many Vault owners reported 100% of their collateral being liquidated.
A Maker community call was held to determine the best plan of action. Maker put out a blog post addressing the situation and proposed various parameters which could be adjusted to prevent further issues. MKR holders have since approved changes including lowering debt ceilings, lowering stability fees, changing auction parameters to allow keepers additional time and limit the total number of auctions.
Among the approved parameter changes was delaying the Debt Auction, designed to cover the +$4M in remaining system debt, in an attempt to give the community more time to prepare.
MKR Debt Auction
Maker is designed with a pool of DAI called the Maker Buffer reserved to cover debts in situations like this. However, the Maker Buffer was unable to cover the deficit caused by the tremendous amount of liquidations. As stated in its whitepaper, the Maker Protocol will now trigger a Debt Auction where MKR is minted and sold for DAI to re-collateralize the system.
Start time: March 19, 6:25 am ET (March 19, 10:25 am UTC)
MKR will be auctioned off in lots for 50,000 Dai
According to parameters of the Maker Protocol as determined by governance, the auction works as in the following example:
The protocol offers a Keeper (bidder) a lot of 250 MKR for 50,000 Dai, which translates to a price of 200 Dai/MKR.
A second keeper bids 50,000 Dai but only requires 230 MKR, which translates to a price of 217 Dai/MKR.
The bid prices increase through the Keepers’ willingness to take slightly less MKR in exchange for 50,000 Dai.
If no one bids on the first lot of 250 MKR, then the auction can be re-initialized after three days, offering 20% more MKR (300 MKR) for 50,000 Dai, which translates to a price of 166.66 Dai/MKR.
Finally, if there is at least one bid, and no one outbids it within 6 hours, the auction ends.
Anyone is free to participate in the auction by running an Auction Keeper. Maker provides documentation on how to run an auction keeper bot but no official front-end UI. However, there are some in the community working on making these systems more accessible for the auction.
Dai Backstop Syndicate
We’re working with Dharma and many other community members to organize a community-led effort dubbed the DAI Backstop Syndicate to form a backstop in support of MKR and act as a buyer of last resort in the upcoming MKR auction.
The idea is to create pool contract that would give syndicate participants a way to participate in the auction process should MKR fall below a given price like 100 DAI / MKR. The intention is to be a backstop, not necessarily buy the MKR nor will it provide liquidity for liquidations during Dai Surplus Auctions (flaps).
The contract will be designed so anyone could trigger an auction using pooled funds at the given price once auctions begin. At which point, all participants would be able to redeem the tokens they minted by supplying Dai for the equiv. Dai / MKR blend held by the pool.
As of writing this, 3 out of the 11 submitted claims related to the MakerDAO incident have been denied by Nexus Mutual. Those with Nexus Mutual cover on MakerDAO have been instructed to wait for more complete information before submitting new claims.
Compound placed in its timelock three precautionary changes to how its protocol handles DAI in the case it becomes unpegged and mass liquidations are required.
The high network congestion forced Synthetix to go down for short period of time as its rates provided by on-chain Chainlink oracles to go stale.
After some time, the system was brought back online and the Synthetix team released SCCP-16 which temporarily increased fee reclamation waiting period to an hour to accommodate extreme network congestion. This change was reverted after the congestion subsided.
Aave protocol also took measures to reduce the impact of MKR and DAI instability.
Combating high gas costs, dYdX progressively increased its minimum trade size throughout the day on March 12. The first step was up to 10 ETH or 2000 DAI, it was ultimately raised as high as 40 ETH or 5000 DAI. By the evening of March 13, the min. trade size was restored back to normal (0.1 ETH or 20 DAI).
DDEX incurred minor losses of $5373 which will be covered by its built-in insurance.
Green on the board
The silver lining of the day was that many smart contracts like Uniswap functioned performed as expected under the massive stress placed on the Ethereum network.
Examining our DeFi rankings during these events, it was clear DEXes like Uniswap, DeFi lenders [like dYdX, Nuo, Robo-Advisor for Yield (RAY), and Dharma], and payment networks like xDai and Connext fared the best. All of which are DeFi smart contracts generally less impacted by price fluctuations and high gas prices with more diverse collateral options and/or lower risk yields.
Stress tests like these help expose cracks in DeFi smart contracts that can be repaired and improved upon. They also serve as important reminders to do your own research and plan accordingly for potential smart contract risks. DeFi is still a very young market and bumps in the road are to be expected. And when things get rough, remember what brought us here together as a community: the exciting prospect of a decentralized financial system open to all.
Whether you just want to stay informed or get involved, we’re always there for community members with questions or looking to dig a little deeper. Reach out to us on Twitter or join the discussion in our Telegram or Discord.
As the crypto market continues to see massive losses, BTC inflow to exchanges has tripled over the past 24 hours, reaching new highs for this year.
In its most active period yesterday, over $358 million USD worth of bitcoin was transferred to exchanges in a single hour, shortly before the price dropped even further from ~$6100 down to the low $5000s.
The number of ETH exchange deposits also spiked massively, more than doubling in half a day as the price crashed by 30% and investors rushed to minimise losses.
Stablecoin Activity: Investors Look to Buy the Dip
But it wasn’t just panic sellers who were transferring their coins to exchanges. The inflow of Tether to exchanges also saw a massive increase, suggesting that many investors are looking to buy the dip.
This makes sense, as Bitcoin’s Stablecoin Supply Ratio has reached record lows, meaning that stablecoins’ buying power over bitcoin is currently at its strongest point ever.
Based on these figures, have we reached the bottom yet, or does crypto have further to fall before recovering?
Take our Twitter poll to have your say and see what the community thinks:
Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.
Open Finance Fundamentals
This report is part of a weekly series where we will explore the mechanics behind major Open Finance protocols and evaluate them on a fundamental basis. You can view prior reports here.
The predominant use case of DeFi lending is to lever up existing positions to heighten returns. Rather than just buying and holding ETH you can use that ETH to take a loan out in DAI to purchase more ETH. This can be done by using a loan protocol such as MakerDAO or Compound and a decentralized exchange such as Uniswap, or it can be simplified to a one-step process using dYdX.
After launching the new dYdX protocol in April, there was consistent growth in volume for most of the year, reaching a peak of nearly $1 million USD averaged out over the month. In September they launched their own native order books to improve the trade experience by providing faster matching, tighter spreads, and less slippage. In November, there was a consistent decline which was likely the result of a few factors. For one, the launch of multi-collateral dai led some users with positions in DAI to close them in anticipation of the upgrade. Major upgrades such as this create uncertainty since no one knows exactly how the transition will occur. Given DAI trading pairs account for over 90% of volume, this likely had a dramatic impact on volume.
Another reason is the drastic decrease in the price of ETH that occurred in November where the price dropped 25% in the span of a week. This triggered some large liquidations, as evidenced by the amount of ETH locked in dYdX.
There is now 4x the amount of Dai than Sai showing that most traders have migrated their positions. Now that Dai seems to be in a stable state more loans have been taken out with it over the last few weeks. As the price of ETH has been rising as well, these factors are now leading to an increase in volume on dYdX. This trend is expected to continue as decentralized margin trading continues playing a pivotal role for traders in the Open Finance space.