MakerDAO Cuts Off Its AAVE-DAI Direct Deposit Module PlatoBlockchain Data Intelligence. Vertical Search. Ai.

MakerDAO Cuts Off Its AAVE-DAI Direct Deposit Module

Time Stamp: June 18, 2022 8:15 AM

MakerDAO

Following a governance vote, MakerDAO, the creator of the decentralized, collateralized stablecoin DAI, has turned off the DAI Direct Deposit Module (D3M). D3M was developed with the help of the Aave team and debuted in April 2021. The module allows the Maker protocol “to establish a maximum variable borrow rate for the DAI market on Aave,” according to Sam from the MakerDAO smart contracts team (@hexonaut). The Maker Protocol’s maximum borrow rate has been temporarily set at 0. The Aave D3M module is turned off with a borrowing rate of 0 and will not mint new DAI in Aave’s lending market. Due to market conditions, the Maker Governance voted to disable the @AaveAave D3M. According to the Urgent Signal Request posted on the recommendation of the Risk Core Unit, this is a preventive measure against potentially unacceptable risks to the Maker Protocol. — Maker (@MakerDAO) June 17, 2022 The Two Proposals On June 14, DeFi platform Aave proposed a solution to “mitigate risk to Aave v2 markets relating to stETH/ETH price variation.” The plan aims to bring the stETH market to a halt, raising the stETH liquidation barrier to 90% and putting a stop to ETH borrowing. The current liquidation threshold (LT) for stETH at Aave is 81 percent, which was just raised on May 19. The increase in stETH’s LT level was accompanied by Aave governance freezing UST on Aave v2 and lowering the loan-to-value (LTV) on stETH to 69 percent. Financial Modeling Platform The Aave idea was started by the team at financial modeling platform Gauntlet. “[Aave’s] existing market liquidity is very likely sufficient to handle predicted liquidations in the protocol,” they wrote. Adding to that, they said that no immediate parameter modifications or risk mitigations were required. However, given the current state of the crypto market, the precaution was intended to protect Aave’s decentralized finance platform from a liquidation spiral. However, in response to Aave’s suggestion, Maker’s Risk Core Unit (RISK-001) proposed temporarily disabling the Aave DAI Direct Deposit Module, which went into effect today, June 17. Aave’s governance proposal to raise the stETH liquidation threshold to 90% as defined by the Risk Core Unit as an “unacceptable risk to the Maker Protocol.”

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