Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc)Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
Babbitt Information (ID: bitcoin8btc)
The MKR auction, also known as the debt auction, was triggered after system-wide undercollateralized debt exceeded $4 million. This auction will sell MKR tokens in exchange for 50,000 incremental DAI, and use the funds raised to pay off outstanding bad debts.
(picture from: tuchong.com)
MakerDAO borrowers mint the stablecoin DAI, which is soft-pegged to the U.S. dollar by using ETH and BAT as collateral. However, earlier today, a large number of MakerDAO loans fell below the collateral threshold as ETH prices plummeted, triggering liquidation proceedings.
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(picture from: tuchong.com)
MakerDAO's liquidation activities are conducted in the form of collateral auctions. Users can bid for DAI to obtain ETH collateral, and the winner of the auction can get at least a 3% discount on the collateral price. While the purpose of this auction was to raise DAI to pay off outstanding debts, today, due to the complete lack of competition, some liquidators won the auction with bids of 0 DAI.
One member of the MakerDAO community concluded:
“Some vaults were liquidated at a price of 0 DAI, resulting in a net loss to the system. MakerDAO had a $500,000 surplus before the price cut, and now has $4 million in liabilities to fill.”
As Gauntlet Networks CEO Tarun Chitra explained, the lack of competition is due to the high gas fees on the Ethereum network.
The ethereum network experienced severe congestion today as market volatility led to a spike in transaction volume. Therefore, users are willing to pay more gas fees to complete a transaction. With the competition in the market, the related fees have also risen.
According to The Block research analyst Matteo Leibowitz, the liquidation bots did not set the gas price correctly, and as a result, the transactions generated by these bots were not verified in time to participate in the auction, allowing a single liquidator to win with a bid of 0 DAI.
