MakerDAO Keeps USDC as Primary Collateral for Dai
Luisa Crawford Mar 26, 2023 10:54
MakerDAO has voted to keep USDC as the primary collateral for Dai, rejecting a proposal to diversify into GUSD and USDP. The decision was made based on reduced risks from a cascading bank run in the US and USDC's return to a $1 peg.
Since there is a possibility of hazards being linked with USDC, the MakerDAO Risk Core Unit recently proposed the notion of diversifying the collateral for Dai. This suggestion was made as a response to the proposal. Nonetheless, MKR holders voted decisively in support of maintaining USDC as the major collateral for Dai. With a vote of 79.02% in favor of expanding the USDC-to-DAI minting capacity and decreasing the cost to 0%, MKR holders voted in favor of retaining USDC as the primary collateral for Dai.
Due to USDC's "possibly more dangerous exposure to uninsured bank deposits" and "a weaker legal framework" in comparison to its rivals, the suggestion advised diversifying collateral into GUSD and USDP. Nevertheless, according to the Risk Core Unit, the risks that are connected with utilizing USDC as collateral have dramatically diminished from the previous week. This information was provided by the Risk Core Unit.
When a string of failed banks forced the USDC to briefly lose its $1 peg, the decision was made to maintain USDC as the principal collateral for Dai transactions. In response to this, MakerDAO has introduced efforts to prevent Dai from being undercollateralized. These actions include increasing the charge to mint Dai using USDC as collateral from 0% to 1%, as well as lowering the daily minting cap for this procedure.
A vote of confidence in the stability of the USDC stablecoin and its capacity to retain its $1 peg can be inferred from the fact that USDC will continue to serve as the principal collateral for the Dai cryptocurrency. Yet, this does bring up concerns about the possible hazards that are connected with placing a significant amount of reliance on a single collateral item.
It is quite possible that new discussions and disputes around collateral diversification will continue to emerge inside decentralized autonomous organizations such as MakerDAO as the cryptocurrency market continues to expand and stablecoins become more widely used.
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