MakerDAO moves to expand collateral assets and upgrade liquidation engine

Decentralized lending and stablecoin protocol MakerDAO has opened governance voting to permit new tokens as collateral.

Plenty of new collateral sorts have been proposed for MakerDAO, probably growing the variety of digital property that may now be used to mint its stablecoin, DAI. Voting started on April 19 and can run for fourteen days.

Seven tokens have been urged as collateral for the Maker, together with Moss Carbon Credit score (MCO2), Rocket Pool’s staked Ethereum (rETH), the 1inch decentralized trade token (1INCH), and the BadgerDAO Sett token (bBADGER).

Three liquidity supplier, or LP, tokens are additionally being voted on as potential collateral, together with SushiSwap’s DAI/USDC LP token, Uniswap’s DAI-PAX LP token, and Uniswap’s GUSD-DAI LP token.

If accredited, these property will be capable of be deposited as collateral to again the creation of latest DAI.

The MakerDAO neighborhood can also be conducting a governance vote on a proposed improve to its liquidation system, dubbed MIP-45. Liquidations are executed by Maker to keep up DAI’s peg to the U.S. greenback by making certain that each one secure tokens generated utilizing Maker’s vaults are sufficiently backed by collateral, the ratio of which varies relying on the asset.

The protocol has been engaged on an improve for the previous yr in response to the ‘Black Thursday crash in March 2020 that noticed hundreds of thousands value of customers’ collateral liquidated after the worth of Ethereum crashed by roughly 50% in 30 hours.

Maker describes the brand new liquidation engine as growing the predictability and safety of the protocol:

“Functionally, the brand new Liquidations system will present larger safety, predictability, and decentralization, facilitating wider participation by the Maker neighborhood and DeFi sector as an entire.”

A number of modifications will likely be made to its sensible contracts ought to the proposal cross, together with a rise of the ‘Emergency Shutdown Threshold’ from 50Ok to 75Ok MKR. The mechanism is an important safety function that permits the system to close down and make underlying collateral out there for redemption by Dai and vault house owners.

Different proposed modifications embody enhancements to the auction model for the liquidation of vault collateral, DeFi aggregator integration to permit larger competitors between bidders, and entry to extra of the market’s liquidity and flash mortgage help.

On the time of writing, nearly 26,000 MKR had been pledged in help of the proposal. As reported by Cointepegraph, MKR prices topped $4,000 in mid-April.

Based on CoinGecko, the quantity of Dai in circulation has surged nearly 200% for the reason that starting of the yr to three.four billion.