MakerDao (MKR) has published a new report that attempts to put the events of 'Blackness Th' into context — and recommends safeguards to ensure it can never happen again.

On March 12-thirteen a roughly fifty% crash in the toll of Ethereum (ETH) led to the under-collateralization of the debt positions underpinning Maker's Dai (DAI) stablecoin.

The document, which was authored by 'MakerMan', said the crash collection liquidations that "effectively swamped" the system'due south liquidators.

With the ETH network suffering from congestion, users were unable to participate in auctions, resulting in a single bidder winning nearly 62,843 ETH for nigh zero DAI across one,461 auctions.

$half-dozen.65 one thousand thousand in losses

In total, the author estimates that the auctions resulted in the Maker system becoming undercollateralized by 6.65 million DAI. The document said there were intangible costs too:

"This result was non merely costly to vault holders, but was to the Maker organisation too, in capital costs, system confidence and Maker reputation by and large."

The written report notes that when additional keepers were able to participate in bids, prices offered between 10% and 14% collateral returns.

MakerDAO recapitalized through debt auctions

MakerDAO is the decentralized finance (DeFi) protocol that creates the stablecoin DAI.

Dai are created when users take on collateralized debt positions — where collateral (often Ether) is deposited in an Ethereum smart-contract, and a portion of the locked assets' value is represented by newly created DAI.

The collateral is also used to drive the stabilization of Dai's value, with the arrangement incentivizing the creation or destruction of Dai depending on whether DAI's price is above or below $1. Loans that can no longer be supported past their collateral enter into liquidation proceedings — where the loan's collateral is auctioned in exchange for Dai.

In response to the crisis, MakerDAO entered into a new series of debt auctions — where new MKR tokens are created and auctioned for DAI in social club to recapitalize the system.

Over 5 million DAI were raised in the auctions, with venture fund Paradigm Capital winning 68% of auctioned MKR

Making changes to prevent future failures

Maker'southward written report identifies several key changes that have been made to the Maker system in guild to prevent comparable crises for the protocol in the hereafter.

MakerDAO'southward governance now has the ability to "instantly halt the sale system and hence liquidations" to forbid the auction of collateralized debt positions for 0 DAI.

Additional changes have likewise been fabricated to the sale system's parameters, including the addition of stablecoin USD Coin (USDC). The Maker community has besides created web interfaces to increase participation in auctions.

The written report likewise recommends introducing safeguards to restart auctions that have less than three bids and two unique bidders, placing a limit of no more than than 50 ETH batches per auction lot, and the creation of a Maker liquidation dashboard.