MakerDAO is moving to expand collateral and upgrade liquidation engine



Decentralized lending and stablecoin protocol MakerDAO has opened board votes to allow new tokens as collateral.

There are a number of new types of collateral suggested for MakerDAO, potentially increasing the number of digital assets that can now be used to store its stablecoin, DAI. The vote started on April 19 and will last for fourteen days.

Seven tokens have been proposed as collateral for the Maker, including Moss Carbon Credit (MCO2), Rocket Pool’s Staked Ethereum (rETH), the 1inch Decentralized Exchange Token (1INCH), and the BadgerDAO Sett Token (bBADGER).

Three liquidity provider or LP tokens are also being voted on as possible collateral, including SushiSwap’s DAI / USDC LP token, Uniswap’s DAI-PAX LP token, and Uniswap’s GUSD-DAI LP token.

If approved, these assets can be deposited as collateral to support the creation of a new DAI.

The MakerDAO community is also holding a board vote on a proposed upgrade to its liquidation system, dubbed MIP-45. Liquidations are performed by Maker to maintain DAI’s peg to the US dollar by ensuring that all stable tokens generated using Maker’s vaults are sufficiently backed by collateral, the ratio of which varies depending on the asset.

The protocol has been working on an upgrade over the past year in response to the ‘Black Thursday’ crash in March 2020 that liquidated millions of user collateral after Ethereum’s price crashed roughly 50% in 30 hours.

Maker describes the new winding up engine as an increase in the predictability and security of the protocol:

“Functionally, the new liquidation system will provide greater security, predictability and decentralization, facilitating wider participation of the Maker community and DeFi industry as a whole.”

Several changes will be made to the smart contracts if the proposal is passed, including an increase in the Emergency Shutdown Threshold from 50K to 75K MKR. The mechanism is a critical security feature that can shut down the system and make underlying collateral available for redemption by Dai and safe owners.

Other proposed changes include improvements to the auction model for vault collateral liquidation, DeFi aggregator integration to allow more competition between bidders, and access to more of the market’s liquidity and support for flash loans.

At the time of writing, nearly 26,000 MKR had been pledged to support the proposal. As reported by Cointepegraph, MKR prices topped $ 4,000 in mid-April.

According to CoinGecko, the amount of Dai in circulation has increased nearly 200% since the beginning of the year to reach 3.4 billion.