The DAI stablecoin briefly lost its dollar peg, following collateral liquidations for the clients of DeFi Saver. The decentralized finance tool aggregates Ethereum-based lending and collateralization projects like Maker DAO and Compound, allowing users to control all from one wallet.
But the automatization process failed to work properly due to Ethereum network overload. Collaterals were liquidated to cover for the extreme movement of ETH, which wiped out around 20% of its price in a rapid mid-week crash.
DeFi Saver announced its systems are now working properly, but pointed out that decentralized finance held risks and urged users to do their own research.
Maker DAO accepts ETH collaterals to issue DAI, but if the ETH price moves too fast, the “biting” function fires, selling the collaterals and cutting a liquidation fee.
DAI currently recovered to $1.01, but just within a day lost most of its supply. DAI recently grew to 89 million coins, but after the liquidations, supply fell to 79 million coins. MKR market prices remain relatively stable at 451.10.
ETH fell to $169.98, from a rather encouraging recent peak at above $220. The Maker DeFi lending scheme holds nearly 1.5 million ETH, for an over-collateralized creation of DAI.
The Ethereum network, however, is taken over by one smart contract burning up 50% of the gas. The Fair Win FOMO game is relentless, buying up blocks and preventing other applications from achieving the distributed computation required for their smart contracts. At peak, the game took as much as 59% of gas, causing the fatal slowdown of transactions for DeFi Saver.
Despite the relatively small supply, DAI coins are well-distributed within the crypto ecosystem. Maker has plans for expansion, to use multiple collaterals and even traditional assets to back the creation of DAI. But the risks for the coin may keep affecting side projects and hurt individual investors.