DeFi Monthly Report | MakerDao encounters the most severe test in history

Since March, many digital assets have been "halved", and DeFi's market value is no exception. According to data from DApp Total, the current DeFi lock-up financial value is $ 862 million. From the curve of the value of locked positions in the last 30 days, it can be seen intuitively that the culprit of "halving" is undoubtedly the 3.12 tragedy. The single-day value of ETH plummeted by more than 50%, causing mortgagors to have time to increase collateral or repay debts, and a large amount of liquidation occurred on multiple DeFi platforms. The total amount of liquidation on that day amounted to 11.73 million US dollars, and the amount of position clearance was 5977 US dollars. The platforms with the highest platform settlement amount are Compound, dYdx, and MakerDao.

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There are 2 things that deserve the most attention in the DeFi ecosystem this month. One is that MakerDao suffered from many unexpected problems in the extreme market, and a series of measures issued by the government to deal with these problems. The other is whether Ethereum, which is the underlying infrastructure of DeFi, can carry the real financial scene. More public chains are starting to work in the DeFi scene, especially DeFi in the cross-chain context represents the future trend.

MakerDao faces the most severe test in history

MakerDao once withstood a decline of more than 90% in ETH in 2018, but in the extreme market that Ethereum plunged more than 50% in a single day, it triggered a chain reaction:

1. MakerDAO's large number of mortgage debt warehouses fell below the liquidation threshold, which triggered the execution of the liquidation process. The liquidators participating in the auction took ETH at 0 DAI cost. Read more: "The ETH slump triggered MakerDAO's first debt auction. Someone successfully completed the liquidation with 0 DAI . " To ensure that zero-price auctions no longer occur, MakerDAO adjusted risk parameters, the most important of which was to adjust the auction duration of each batch of collateral from 10 minutes to 6 hours. In addition, Maker reduced the Dai deposit rate to zero and introduced a collateral auction fuse mechanism.

2. The DAI of the stablecoin broke its premium, and Dai holders exchanged USDC arbitrage with Oasis. Due to short-term liquidity depletion, there is no Dai to buy on the market. For Dai holders, no one wants to sell Gas due to the high cost of Ethereum congestion. In response to the liquidity crisis, Maker added the stablecoin USDC as collateral for Dai. Believers pursuing absolute decentralization cannot accept the introduction of a centralized stablecoin, but there is indeed no better way to solve the current problem.

3. Maker has a financial loophole, with a $ 5.3 million difference between the number of collateral and the number of tokens issued. This situation has long been expected in Maker's system design book. The method adopted is to start the debt auction. The system will mint MKR (the total amount of MKR in circulation) and repurchase Dai on the market. According to statistics from Dune Analytics, a total of 21,000 MKR tokens were sold for 5.3 million Dai. A total of 36 buyers successfully participated in the bidding, and each MKR bid was between 220 and 300 Dai. However, for some unknown reason, there was a transaction of 3090 Dai to purchase MKR, and 16 MKR were purchased.

Recommended article: "The most complete timeline of the MakerDAO Black Swan incident. How can I be alive 24 hours a day?" 》

Cross-chain DeFi ecology shows a trend

Many public chain projects are trying to build a DeFi ecosystem that is superior to Ethereum. On March 30, the MOV protocol based on Biyuan Chain was officially launched. Fantom, a Korean public chain project, launched Fantom.finance, a DeFi platform based on Fantom. In addition, Kava, a cross-chain DeFi platform based on Cosmos, went online at the end of last year. Recently, Kava has integrated the price data of the centralized oracle machine Band Protocol, and Band will provide Kava with secure USD price data for collateral such as BTC, XRP, ATOM to support cross-chain CDP and stable coins.

Fantom and Kava are both advances in the application layer, while MOV is the debut of the long-awaited protocol layer, demonstrating a systematic solution for the DeFi ecosystem. MOV is a next-generation decentralized cross-chain Layer2 value exchange protocol. It consists of three core modules: the value exchange engine magnetic contract (Magnet), decentralized cross-chain gateway (OFMF), and Layer2 high-speed side chain (Vapor). Construct an integrated and diversified asset value exchange and collaboration ecosystem.

In the recent AMA, the founder of the original chain, Chang Yan, mentioned the current pain points of DeFi: a single asset mortgage is definitely risky, and a multi-asset mortgage is relatively better; even a multi-asset mortgage, it should deal with different asset estimates and different flows. Sexual risk and market risk, independent mortgage, and risk isolation; in addition, there must be a scientific risk model to quantify parameters such as mortgage rate and stable fee rate. He asserted with confidence: "MOV will be the trump card in DeFi."

Read more:

"MOV is officially launched, creating an ace DeFi infrastructure, making transactions everywhere"

"Transfer is transaction, decentralized transaction may look like this"

"From" Lego Toys "to" Open Finance ", DeFi lacks a systematic risk control solution"

Brief description of DeFi project dynamics

Some projects have been shut down this month …

iearn.finance: The founder Andre Cronje will leave the project iearn.finance due to the social pressure. But iearn's agreement has been completed, and the project will continue to run on its own as planned.

Paradigm Labs: The reason for the planned shutdown is that the product does not match the market and lack of funding. It is reported that the project received seed round financing in 2018 and is committed to developing a liquidity integration protocol for decentralized exchanges. It has been supported by Polychain Capital, Dragonfly Capital and Chapter One Ventures.

Some projects have made new progress …

DeBank: A DeFi wallet called DeBank is online. It currently contains two main functions: one is asset management. Users can enter the Ethereum address to view the asset status of the address and the various DeFi assets under the address. Real-time status. The second is a data tool, which contains statistics on four major markets, including mortgage lending, stablecoins, leveraged transactions and spot transactions.

Read more: "Interview with Babbitt: Asset Management Wallet DeBank goes live, calculate your DeFi mess"

DMM: Decentralized oracle Chainlink announced that it will cooperate with DeFi Money Market (DMM) to launch a DeFi product on the Ethereum mainnet, which will allow users to use real-world assets as collateral, not just collateral between cryptocurrencies Borrow. DeFi Money Market (DMM) is an agreement to earn interest on Ethereum assets that are collateralized by real assets represented on the chain.

DeFi Saver: Loan agreement Aave release official blog said that one-stop applications such as DeFi Saver and InstaDapp provide users with a one-stop increase in leverage (by generating more DAI to get more ETH) and deleveraging (remove some collateral) Purchase DAI to repay debt) function, which can close the CDP account for users in one stop, thereby avoiding liquidation. Especially recently, DeFi Saver has integrated the Aave Protocol lightning loan function, which can make this function play its maximum efficiency.