MakerDao & Ethereum implode, after the fall DJED rises.
The MakerDao is a Credit Facility on the Ethereum Blockchain. The MakerDao is by far the biggest decentralized finance platform in existence. It is believed that on March 12th, 2020 there were over 683 million dollars in Ethereum deposited in the MakerDao The Ethereum blockchain is the birthplace of smart contract applications. Smart contracts are the backbone of decentralized finance. The MakerDao provides loans called collateralized debt products, which are used by Ethereum investors to increase their returns on investment. These collateralized debt products are the main product of decentralized finance. These CDP are debt borrowed against the value of Ethereum. On March 12th, 2020 the price of Bitcoin dropped from $9000 to $4000 and the Altcoins like Ethereum followed, shedding 50% of their value in one day.
So many of the collateralized debt positions on Ethereum which were over Capitalized when Ethereum was $200, were suddenly under capitalized debt positions when Ethereum hit $100. This type of market movement with sudden under capitalization of debt triggers margin calls in the stock market and liquidations at a DeFi Credit Facility. But liquidations are run differently on the MakerDao the Ethereum is auctioned off in a competitive bidding process that normally results in the best, or highest possible price for liquidated Ethereum.
But there was one huge problem. The bids are transactions. Ethereum reaches its transactional capacitance and smart bidders notice fewer and fewer bids making it through the transaction process. So the bidders did what any smart business person would do... in the absence of competing bids they bid very low. Sometimes zero dollars on accounts containing hundreds and even thousands of Ethereum. And in the absence of competing bids, these zero bids won. It was unbelievable and yet it was very believable.
This is what I think happened based on the many stories written by the event.
Later, after the smoke cleared Investors signed into their accounts expecting to have lost 50% of the Ethereum plus a liquidation charge of 13 percent. But instead they found that their accounts were at zero. Instead of competitive bidding the congestion on the Ethereum blockchain resulted in singular bids of zero dollars and because they were unopposed, the bids were executed.
Smart Contracts aren’t smart, but they are dependable. They sold to the highest bidder in an attempt to recover funds. But with zero dollar bids they liquidated not some but all the Ethereum in each account. They did exactly what they were programmed to do. They don’t think they execute. That’s why we love them and that’s why we fear them.
Meanwhile, back on the Tron blockchain a group of developers seize the moment to announce completion of their own version of the MakerDao. But with one important difference. It’s on a DPOS blockchain with over 1000 times as much transactional capacity as Ethereum maximum capacity, and it can scale up to meet greater demand.
Coincidentally on that very day eight different internet news agencies report the operational status of the DJED credit facility. The one unifying theme of their reporting is that DJED is a clone of single collateral MakerDao!
The MakerDao gets wrecked due to transactional issues on the Ethereum Blockchain and investors lose their entire investments. Then rising like a Phoenix from the ashes of the Ethereum Meltdown comes a clone of the MakerDao.
The great Steven Speilburg must have written this movie. Plus the News stories which sound like they are attacking Justin Sun because they say the code for DJED looks exactly like the code for the MakerDao are actually provide positive reassurance to investors scared of losing money on the original MakerDao because of the problems on the Ethereum blockchain. They can invest in its exact clone on a faster blockchain.
Anyone who doesn’t think this is a great strategy probably isn’t being honest with themselves and refuses to recognize good planning and good press.
If I was a conspiracy theorist or a cynic I might even say that maybe the press does know and that’s why they are all writing the same thing: MakerDao clone.
This couldn’t possibly be the work of Justin Sun? whose organization excels at getting lots of Publicity for his projects? Yes, that’s exactly what this is and he is the new owner of Steemit Inc.,
Stay informed my friends.
✍️ Shortsegments
Title: MakerDao & Ethereum implode, after the fall DJED rises.
Upvoted. People keep ignoring scalability issues, it is ridiculous.
I don't know why but some people's brain doesn't grasp the pain of not being able to transact.
I remember when Krypto kitties became popular, I wanted to get into the game but couldn't because the number of transactions on the network exceeded the maximum capacity.
When I was able to move my Eth again, I sold it all, and never bought back. What is the point of having a project that doesn't work when it is successful (many users)?
And for those who believe in Eth 2.0, they are just like Bitconnect believers.
LOL 🤣😂
This is hilarious....and the funniest thing about your comment is it’s true.
People deluded themselves thinking they just have to pay more for gas and still transact, but it’s a mirage. I don’t know everything about Ethereum 2.0 , but I think it’s time for other projects to rise up and claim some of this business.
This👆
Very good points, exactly the reason other DeFi blockchains will succeed. I think a MakerDao clone on a blockchain with cheaper tokens and free or very cheap transaction fees is the way to go...
Ethereum has market acceptance and scalability will be fixed with version 2.0.
That's a joke. They can't manage to get to Proof of Stake in three years and you expect them to solve scalability without compromising decentralization.
Wow, three years. I understand why decentralized projects have trouble making decisions and getting things done. These are the times you long for the definitive actions of centralized systems.
That’s good news. What are they planning?
Implement the POS and increase the transactions capacity.
That’s great news.
What will happen to the miners? Will there be masternodes or supermodels?
You will make an interest when you stake the Ether.
That’s good news. Yhanks
wait...
so was it just CDPs where the levels were $100 to get liquidated, that accounts were emptied?
did it happen to EVERYONE that had CDPs set to liquidate at the $100 level, or just some?
Hi
Liquidation is triggered both by the price of Ethereum and the Collateralization ratio. Bank loans use a LTV or loan-to-value ratio to determine how much to loan you. The MakerDao uses a Collateralization ratio, which is the inverse of loan-to-value. So instead of having 80,000 loan/ 100,000 home value, they have home value/loan value and call it a Collateralization ratio and it liquidates your assets at ratio 1.5 or below. So the price of EThereum is important, but also how much you borrowed. If you have a thousand Ethereum and borrow 500, your Collateralization ratio is 2.0, so Ethereum price would have to drop more for you to trigger liquidation then someone who borrowed more and ratio was 1.6 or 1.7. Then the smart contract sells off enough Ethereum to return ration to >1.5. Usually it’s around 66% of your Ethereum.
Interesting question.
Also curious what was learned from the situation and whether there were any amendments to the code made such that it shall not happen again...?
They debated a long time whether to reimburse invests. But so far I haven’t heard of any code changes.