The ecosystem of the finances decentralized (DeFi) enjoy crops profitable thanks to the Yield Farming or “agricultural performance”, but in this field there are signs that not everything germinates, as MakerDAO manifested imbalances with your stablecoin DAI.
The so-called farmers ‘ performance are completing cycles of operations to obtain profitability across different protocols or products DeFi. This type of strategy is known as Yield Farmingin some cases, allows a user achieve more than 100% of annualized returna level of benefit that has attracted hundreds of millions of dollars to the finance industry decentralized in the last few weeks.
However, in the field of agricultural performance are also perceived unintended consequences, especially since the team Compound introduced changes to the way in which it distributes its token COMP to the liquidity providers and borrowers.
The change was introduced in the Compound to counteract the excessive leverage of the Yield Farming on the platform, and at the same time to achieve a more equitable distribution of their token native.
This measure then changed the rules of the game of Yield Farming due to a new structure of incentives that put DAI in the focus of those who seek better performance. Since it introduced its update, Compound distributed COMP proportionally across markets that pay more dollars, which means that the lenders in the markets DAI are willing to get the greater portion of COMP possible.
After the change, DAI became active with the performance that can be more lucrative, therefore, also the most coveted, generating a high demand for stablecoin. Even, the market of DAI, which was the fourth in the Compound, jumped to the top with a large part of the natural supply of DAI encased in the agriculture of COMP, as shown by the data of Dune Analytics.
With the high demand, DAI lost his stability, driving the price above a dollar (US $ 1,013), as reflected in the index of the Messari. Now, the governance of MakerDAO fired its systems of alert and searches for a solution that allows you to restore the lost balance in your ecosystem.
The market of DAI has become the largest in the Compound, as can be seen in this graph. Such a situation emerges Yield Farming, would upset the balance of the ecosystem of MakerDAO. Source: Dune analytics.
Emergency MakerDAO
With the aim of stabilising the price of DAI in the governance of MarkerDAO has been implementing emergency measures. Among them, increased their debt ceiling from USDC for the system to be able to meet the growing demand of DAI. However, this produced no changes and the linking of DAI continues to be at risk, since only there is a demand and not much supply.
While the Yield Farming is driving the growth of the sector of the DeFi, the nervousness takes over the ecosystem MakerDAO. To the point that their governance submitted for consideration to the proposal to seek to Compound that you turn off the rewards for the market of DAI, until you understand how you can avoid the excessive pressure that the strong demand exerted on the stablecoin”, as posed in the forum of the company.
The concerns of MakerDAO revolve around the future liquidity of DAI. Also grows the expectation that deleveraging current re-trigger a crisis like the one that occurred on the platform during the so-called black Thursday of the last month of march.
At the time of writing this article, there are 765 million dollars of DAI in the Compound. At the same time, its capitalization is just 187,5 million dollars. This is due to the loan circular, that is to say, it is the product of depositing DAI in Compound, borrow IRA and re-deposit it until you reach a leverage of up to 4 times.
The platform Compound, according to DeFi Press, leads the market DeFi, is not exempt of risks. As was published Breaking News, operates under a system of custody and certain updates are made in a centralized manner.
Ameen Soleimani, a scholar of the ecosystem DeFi and founder of SpankChain, a platform for adults based on Ethereum, also observes, that when block tokens in the Compound, you are not guaranteed to the user who can remove them whenever you want. If all the money is locked in outstanding loans, the transaction of the withdrawal will fail.