As a result, Vault (position) owners, the system, as well as MKR holders (more on this later) suffered losses. Only few liquidators benefited from this event, as well as DAI holders, which price has been higher than $1 due to the lack of liquidity.

People, concerned about MakerDAO governance, quickly noticed a problem, dubbing this day as a Black Thursday, and gathered on the Risk Call to plan future actions for eliminating system debt. Instead of Emergency Global Shutdown, a less uncompromising option for the ecosystem was chosen, namely the launch of Debt Auction. At this auction, users will be able to buy freshly minted MKRs for DAI. Auction will dilute the token share of current MKR holders. The purchase price is expected to be 200 DAI, and the lot size is 250 MKR, which makes participation in the auction quite difficult for small players. Dharma created Maker Backstop Syndicate to help them. The Paradigm crypto fund has already gathered to compete with them.

At the same time, new system parameters were selected at the MakerDAO forum, which should eliminate the possibility of repeating such liquidation scenario. The maximum lot size was increased from 50 to 500 ETH, and the duration of the auction rounds was prolonged as well. It is difficult to say how this will affect the system, because such parameters create additional risk and require more capital, but they certainly make it more complicated to carry out fraudulent manipulations in the future. At the moment, these parameters have been implemented, but it took a whole day. The reason of this lag is GSM that was activated three weeks ago, — a module that creates a delay between receiving the required number of votes and the proposal execution. Rune mentioned on the forum that the lack of GSM would solve the problem earlier, but security is always a trade-off.

Analysis

To build up a coherent picture of the situation, the data on liquidations of the past two days is required. We collected this data from the Ethereum blockchain.

Following is a brief summary on collected data:

First, let’s take a look at the liquidations for these two days as a whole. We see two peaks associated with sharp changes in the price of the oracle: in the range of 15–16 hours (hereinafter the time in UTC) and after 00–01 hours of the next day.