MakerDAO voted to disable Aave DAI supply in an effort to reduce exposure to Celsius using stETH as collateral through the Direct Deposit Module so let’s read more today in our latest cryptocurrency news.
MakerDAO voted to disable AAve DAI Supply for the DEFI lending platform later today and that platform noted:
“The Maker Governance has voted to temporarily disable the Aave DAI Direct Deposit Module.”
The Maker Governance has voted to temporarily disable the @AaveAave DAI Direct Deposit Module (D3M).
This change is available for execution on June 17 2022 21:03 UTC.
— Maker (@MakerDAO) June 15, 2022
The governance proposal put forward earlier this week invited the community to vote on disabling D3M for aave and reduce Maker’s exposure to the troubled lending platform Celsius. The proposal was accepted by the community of governance token holders a few days ago and it is set to be implemented today. It aims to prevent more borrowing by Celsius using Aave’s D3M by setting the Target Borrow rate to 0 in the smart contract that is responsible for D3M. The proposal read:
“This change is being proposed to temporarily disable the Aave D3M. The Aave DAI Direct Deposit Module (D3M) Target Borrow Rate (bar) will be set to 0”
The Direct Deposit Module enabled the interaction of the Maker ecosystem with the third-party lending pools and the goal is to maintain the DAI itnerest rates across lending pools, especially with Aave. The latter has a total exposure of 200 million DAI out of which 100 million are borrowed by Celsius using stETH. Celsius paused the withdrawals and transfers for the users earlier this week amid the growing concerns over the DeFi Lender exposure to stETH and with the mounting uncertainty in the launch date of Ethereum’s upcoming Merge, stETH lost the peg against Ethereum and put very strong pressure on stETH and risked a redemption wave which locked customer funds into stETH.
If Celsius becomes insolvent and faces a margin call, it will dump the stETH and cause it to depeg further from ETH so, in turn, it will make MakerDAO’s 100 million DAI loans to Celsius irrecoverable. In order to protect the lending position and further borrowing of DAI, using stETH collateral MakerDAO decided to pause the D3M. following Maker, Aave is looking to freeze stETH and will use it as collateral on the platform as per the proposal dubbed “proposal 83.” stETH lost its peg as well and it is hovering below the ETH price while stETH Trades around $1025 with a 6% difference from the price of ETH.
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