- MakerDAO has paused DAI deposits into Aave, following the crypto lender Celsius’s recent instance.
- After the wobbling ship of crypto in the waters of volatility, several holders have sold their staked ETH, causing its price to plunge.
- The DAO has decided to review the decision within two weeks.
Prominent DAO Suspends DAI Deposits
As Celsius, the crypto lender borrowed 100 million DAI against the collateral of stETH out of each 200 Million DAI borrowed from Ethereum V2 of Aave, and this instance was recently followed by Maker’s DAO suspension.
The platform of Aave facilitates the users to lend, borrow and generate interest on virtual assets. An individual is required to post collateral for a loan in order to borrow virtual assets from Aave.
Although collateralization in Decentralised Finance (DeFi) is not very different from that of conventional finance, it is just a bit more technical. But in the end, the smart contract governing the transaction would liquidate or sell the collateral to pay the loans.
With the instance of the crypto lender Celsius borrowing 100 Million DAI by depositing a derivative of Ethereum (ETH), stETH, it was exposing the lenders of DAI to the derivative token’s instability.
Following the completion of the Ethereum 2.0 upgrade and when withdrawals are enabled, one stETH would be redeemable for one ETH.
Because of the bearish trends and market crash that the crypto space has been witnessing, ETH saw a sharp plunge which somewhat prompted the holders to sell their stETH, driving its price lower than Ethereum (ETH). And hence, halting DAI deposits effectively prevents the borrowers from taking out loans against stETH.
It was only last week when Celsius witnessed liquidations of stETH collateral in the situation of withdrawal suspensions.
MakerDAO has decided to hold a discussion in two weeks to talk about the reactivation of the DAI deposits.
At the time of writing, the second largest crypto asset Ethereum (ETH), is exchanging hands at $1,078 with a market cap of $130,781,524,163 and is up by approximately 14% in the last twenty-four hours.
Source: https://www.thecoinrepublic.com/2022/06/20/makerdao-halts-dai-deposits-amidst-unfavourable-market-conditions/