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Devs Debate Using USDC for Collateral After DAI Stablecoin Faces Liquidity Issues

Devs Debate Using USDC for Collateral After DAI Stablecoin Faces Liquidity Issues

Since March 12, the Makerdao community has been struggling with the stablecoin DAI which has been over $4 million undercollaterized since the crypto market carnage started. On March 18, the developers plan to auction newly minted maker (MKR) tokens in order to remove the outstanding debt. However, the auction might not be enough and the Makerdao community is debating on adding the stablecoin USDC as collateral.

Also read: ETH Price Strains Defi Collateral Loans as ‘Black Swan’ Event Strikes Makerdao

Makerdao Community Debates Adding USDC for Collateral

The price of ethereum (ETH) has lost more than 40% in fiat value during the last week. News.Bitcoin.com reported on how the decentralized finance (defi) community watched Makerdao’s significant issues which resulted in over $4 million in DAI undercollateralized. Because the project uses ethereum (ETH) as collateral, the combined effects of the price of ETH falling and oracle discrepancies hurt the project’s collateralized loans.

The price of ethereum (ETH) has slid over 40% downwards since March 12, 2020. This has caused more than $4 million worth of loans to be undercollaterized.

To tackle the issues, Makerdao developers revealed they would be auctioning newly issued MKR to remove the debts incurred by the market bloodbath. The auctioning of new MKR is described in the project’s whitepaper as a method that can be used to stave off undercollateralized positions. However, in the eyes of a few MKR leaders, the auction to mitigate DAI liquidity risk in an uncertain market might not be enough. According to a recently published community forum post, the team is debating whether they should use the stablecoin USDC as collateral. Basically a stablecoin to make sure the other stablecoin holds its peg.

“Given the ...

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