March 13, 2023

MakerDAO Proposes Emergency Measures to Reinstate DAI Peg After Stablecoin Contagion

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Balance Capital

As the cryptocurrency market tries to come to terms with the sudden collapse of Silicon Valley Bank and Silvergate's voluntary liquidation, the algorithmic stablecoin DAI has been affected, dropping to an all-time low of 0.88 cents. DAI is a stablecoin backed by MakerDAO's holdings, which include USDC. The recent de-pegging of USDC has resulted in concerns about the stability of the stablecoin market, and MakerDAO has taken steps to address these risks.

Emergency Proposal

MakerDAO has presented an emergency proposal to reinforce its platform against the risks associated with stablecoins. The proposal aims to limit the exposure to distressed stablecoins while strengthening the stability of DAI's peg.

The DeFi platform proposes to increase USDC-DAI swap fees, which would discourage USDC-DAI swaps and incentivize alternative ways of offloading USDC. Additionally, the platform aims to implement a 250 million DAI daily mint limit.

If passed, the proposal will result in a higher debt ceiling of 1 billion DAI and reduce the USDP to DAI swap fee to 0%. The rationale behind higher swap fees is to prevent exposure to liquidity risks associated with stablecoin runs.

The recent instability in the stablecoin market has inadvertently triggered a demand for MKR, MakerDAO's native token. Despite experiencing a 37% pullback from its previous high, MKR bounced back with a 20% recovery to its current price of $728. The recovery has made it one of the few top tokens that have achieved a sizable bounce back.

Whales have been taking advantage of the discounted price of MKR to buy more, resulting in a surge in network growth. Additionally, there has been a surge in the volume and circulation of DAI as traders migrate from centralized stablecoins. This has fueled a resurgence of demand for MKR.

Proposal Key Highlights

Source: Maker Governance - Proposal Emergency Parameter Changes - March 11, 2023 (

Community Reactions

Majority in favor of the proposal.

“What will go down as a memorable weekend of uncertainty and traumatic stress, largely due to previous defaults caused by under-collateral instruments that had a devastating impact on the ecosystem, this Emergency Executive is taking the necessary precautions to safeguard Maker and DAI. The DeFi community, along with the MakerDAO community, will learn from this experience that relying on one (1) collateral type is not prudent risk management. Although we all understand this, it is often overlooked as we assume others are more astute than ourselves, when in reality, they are not. This experience will be a valuable lesson in Maker’s history and serves as a reminder that the protocol must always aim to be self-sufficient, self-reliant and forever decentralized. We cannot depend on the autonomy of a Central Bank that is “data dependent” and is no longer in touch with reality. We must strive to do better. Thank you to all the teams involved overnight, day and morning to get this Executive to a vote. You are deeply appreciated. :heart_hands: Forever MakerDAO. We move to SUPPORT.”