03-18-2020 icon

MakerDao Approves USDC Stablecoin as Collateral

By calvin
makerdao approves usdc coin

Following heightened volatility risks, MakerDao governance approves the use of USD Coin (USDC) stablecoin as collateral in the Maker Protocol. The deicsion was made with the purpose of reducing liquidity risks. 

MakerDao Approves USDC Stablecoin as Risks Loom

According to a blog post by MakerDao on the matter, 

“Prior to the vote, the Maker community discussed the merits of adding USDC, as well as the appropriate risk parameters for the token (listed below), in the Maker Governance Forum. In addition, the governance community considered in a public meeting what, if any, impact adding a centralized stablecoin as a collateral type to the protocol might have on users and the Decentralized Finance (DeFi) movement as a whole. Watch the recording of that meeting.”

Now, there are three coins that can be considered accepted types of collateral for the generation of Dai. USDC joins Basic Attention Token (BAT) and Eth as acceptable collateral.

Risks of USDC Considered

A major point of discussion was centred around the effects of using a centralized coin as a collateral type. 

The following risk parameters of USDC were highlighted:

Stability fee: 20% (annually)

Collateralization ratio: 125%

Debt ceiling: 20 million

Liquidation penalty: 13%

Collateral auction lot size:: 50,000 USDC

Collateral auction minimum price change:: 3%

Collateral auction bid challenge window: 6 hours

Collateral auction maximum duration:: 3 days

Dust: 20 (Dai)

It was resolved that USDC would help to address price instability and liquidity issues that have increased since the crash the Ether market experienced last week. 

MakerDao has played a significant role in shaping the decentralized finance ecosystem, a space that has significantly influenced the price of Ethereum and the success of many decentralized applications that run on the blockchain. 

Collateralized Debt Positions (CDP) can be made, using Dai, a stablecoin supported by MakerDao. It is designed to be for everyone, regardless of where they live or who they are.