Victims Left Behind – MakerDAO is the lending protocol behind the DAI stablecoin. Last March, it experienced a bug following the crash in the price of ETH causing the liquidation of 4.5 million dollars in loans. Despite their request, it appears that aggrieved users will not be reimbursed.
MakerDAO Black Thursday
In the middle of last March, in the midst of the explosion of Covid-19, the price of several cryptocurrencies fell violently. On average, the entire market has plunged 30% , and of course Ether has suffered the same fate.
Unfortunately, this downfall resulted in a whole bunch of detrimental consequences for the DeFi ecosystem . The oracles of the MakerDAO system failed to follow the course of Ether and gave the wrong price to the entire system. So while Bitcoin Millionaire capped at $ 130, oracles pointed to 166.
The consequences were catastrophic . The bad price announced by the Oracles as well as a lack of competition at the level of loan liquidators resulted in the liquidation of many loans, creating a debt close to 4.5 million dollars .
Damaged users will not be reimbursed
Following this event, many users turned against the system because their loans had been brutally liquidated.
As a result, a governance vote was taken to find out whether the aggrieved users would be compensated. Unfortunately, the vote only attracted 38 voters, who voted 65% against compensating aggrieved users.
Other choices offered a partial refund, ranging from 3 to 24% of the total amount. However, only the 15% and 18% proposals received votes.
The limits of governance
The result of this vote highlights the limits of decentralized governance . Indeed, in the case of MakerDAO, the vote mainly attracted whales (large MKR holders) who were the only ones to give their opinion.
Thus, the 38 voters used the equivalent of $ 39 million in MKR token for the vote. This only represents 8.74% stake for all token holders.
In this specific case, the outcome of the vote is not surprising. The aggrieved users demanded refunds in MKR. On the other hand, the holders of MKR, for their part, did not want the creation of new tokens, which would have the effect of diluting the capital.