Most of the contracts in MakerDAO are currently holding collateral worth 300% of the loan amount. You won't see any widespread failures until either that changes or the price drops at least 66%.
MakerDAO gets stress tested as ETH price plummets
21–30 of 95 posts
Re: MakerDAO gets stress tested as ETH price plummets
#22> leading to oracle’s price updates not going through with the gas price they chose
wait so the thing relies on oracles? I always thought that MakerDAO was a decentralized stablecoin. Does this mean that it is centralized then?
> This put the system in a $4 million deficit
So is this proof that MakerDAO does not work in practice?
Re: MakerDAO gets stress tested as ETH price plummets
#23Earlier quoted context omitted.
I work in the crypto industry and I think this a failure of our community to properly inform people of the risks. These people weren't gambling for massive returns. They thought it would be a safe way of getting pretty good ones.
Really? I've never seen a hive of more rampant unchecked greed.
[deleted]
Re: MakerDAO gets stress tested as ETH price plummets
#24A lot of Ethereum DeFi (and cryptocurrency in general) has been pretty frustrating to watch, because it's a lot of people with big ideas and little understanding of how to build stable financial systems.
In the case of Maker, what's interesting is that a stablecoin is actually possible. Maker has a really good core idea, several great elements to it:
1. The stablecoin is backed by collateral, typically a significant amount more collateral than the amount of stablecoin that has been issued.
2. People locking up collateral get greater exposure to Eth's volatility. So there's genuinely a reason to lock up collateral to issue stablecoins if you are bullish on Eth.
But, this breaks down a bit. There's no way to instantly convert the stablecoin back into the collateral asset, you have to find someone with a CDP who is willing to buy the stablecoin from you.
Similarly, there's no way to unlock your collateralized asset, you have to find someone who is willing to sell you the stablecoin in order to open up your vault and get your eth out.
So on both sides of the equation, you have this liquidity risk that doesn't really need to exist.
I could go on for a bit more, there are a bunch of other design decisions that are backwards and don't work well. But the fundamental ideas are actually pretty okay, and if you took a more traditional finance person and had them work through all the tiny details, I think you'd end up with something pretty powerful.
In that sense, it's almost like encryption. The tiniest detail being incorrect can make the whole construction useless, even if as a whole the fundamentals are pretty solid.
Re: MakerDAO gets stress tested as ETH price plummets
#25Earlier quoted context omitted.
I work in the crypto industry and I think this a failure of our community to properly inform people of the risks. These people weren't gambling for massive returns. They thought it would be a safe way of getting pretty good ones.
Returns are always the inverse of risk. If you are getting "pretty good" returns, then you have pretty high risk.
They thought they were risking 13% of their collateral in the event of a liquidation - not 100%. They were risking way more than they thought.
Re: MakerDAO gets stress tested as ETH price plummets
#26Given that this was a black swan event and the actual damage is minimal, DeFi has proven to be extremely durable.
Minimal? My understanding is someone was able to pull ETH out at near zero DAI. Nothing the contract didn't allow, but unforseen use of it which caused some people who had invested that ETH to essentially lose their life savings!
Imagine putting your life savings into shitcoins.
Re: MakerDAO gets stress tested as ETH price plummets
#27Earlier quoted context omitted.
If there really are people that literally put their entire life savings into a single, unproven vessel then they almost certainly did so because they were gambling it would make them (an order of magnitude+) more money than a more reliable stable alternative. They won’t find much pity.
I work in the crypto industry and I think this a failure of our community to properly inform people of the risks. These people weren't gambling for massive returns. They thought it would be a safe way of getting pretty good ones.
If someone invested in crypto thinking it would be a safe way of getting anything that’s still on them.
Re: MakerDAO gets stress tested as ETH price plummets
#28Earlier quoted context omitted.
Minimal? My understanding is someone was able to pull ETH out at near zero DAI. Nothing the contract didn't allow, but unforseen use of it which caused some people who had invested that ETH to essentially lose their life savings!
It's more complicated. Their collateral ratio has dropped below the liquidation level of 150%. So at best they would only get a fraction of their collateral back (any liquidation has a discount and a 13% penalty) - fundamentally they lost because their speculative bet didn't pay off. So yes, they lost more than they should, but describing it like they lost everything because of the liquidation problem alone is mislea…
> never going to repeat again
So now it just needs a little help from miners to actively exclude all other bidders.
My understanding is that in this case there were other bidders but they were drowned out by the winning bidder paying much more gas.
Re: MakerDAO gets stress tested as ETH price plummets
#29Earlier quoted context omitted.
Black swans happen once a decade or so: dotcom bust, 9/11, GFC, now coronavirus. If the crypto can't deal with it, it's not much of an investment or a store of value.
Well the solution is to have some sort of emergency fund which activates in black swan events to rebalance the portfolio. It's just something to factor in. Adds some costs to operations but only fractions of a percent.
[deleted]
Re: MakerDAO gets stress tested as ETH price plummets
#30A lot of Ethereum DeFi (and cryptocurrency in general) has been pretty frustrating to watch, because it's a lot of people with big ideas and little understanding of how to build stable financial systems. In the case of Maker, what's interesting is that a stablecoin is actually possible. Maker has a really good core idea, several great elements to it: 1. The stablecoin is backed by collateral, typically a significant…
>So on both sides of the equation, you have this liquidity risk that doesn't really need to exist.
I'd love to hear more of your thoughts on this. It's apparently big problem with the Maker protocol, and seems to be an inherent issue with the use of a perpetual (afaik we're seeing the price of DAI spike as a consequence), but I'm not aware of a simple fix.