The Maker community is looking for solutions after an analysis by B.Protocol suggested that it is possible to exploit the liquidation system to create under-collateralized debt.
The researchers created small vaults for $128, just above Maker's "Dust" parameter that defines the minimum size for new vaults.
As Maker's oracles updated to new prices that made these vaults eligible for liquidation, BProtocol found that the debt remained unclaimed for several hours.
While the researchers later closed the bad debt loans on their own, the mechanism could be abused to create a Dai position that would never be liquidated.
The reason why these vaults are not liquidated has likely to do with gas prices.
Each liquidation process costs approximately 500,000 gas, about ten times higher than the cost of opening each vault or sending a token transaction.
Bad vaults could eventually fall decisively below the 100% collateralization threshold, meaning that even if they were liquidated, they would still leave the system with unbacked DAI. Alternatively, high gas costs could mean that the largest profitable bid would not return enough DAI to cover the debt.
The Maker community is studying a quick remedy of raising the minimum vault size, but Velner was skeptical of this solution, as it is unclear if a higher minimum would suddenly make these vaults attractive to liquidator bots.
A longer-term solution is "Liquidations 2.0," where the protocol would directly pay liquidators for securing debt.
Given the current efforts to overhaul debt auctions, it appears that the community is beginning to recognize their limitations.
Some loans on Maker are never liquidated, prompting debt auction overhaul
gepubliceerd op Nov 16, 2020
by Cointele | gepubliceerd op Coinage
Coinage
Vermeld in dit artikel
Recent nieuws
Alles zien
First Mover: What's Next for Bitcoin as Wall Street Gets Vaccine Booster
Bitcoin was higher for a second day, staying in a range of between roughly $15,200 and $15,600, as news of progress in developing a coronavirus vaccine appeared to touch off a rally in U.S. stocks.
Market Wrap: Bitcoin Fails to Break $15.9K; Over 50K ETH Staked on Eth 2.0 Contract
Bitcoin gained Wednesday while Ethereum 2.0 staking has been ramping up.
Citibank Analyst Says Bitcoin Could Pass $300K by December 2021
A senior analyst at U.S.-based financial giant Citibank has penned a report drawing on similarities between the 1970s gold market and bitcoin.
Blockchain Bites: Data Unions. Hard Forks. And One Citi Analyst's Case for $300K BTC.
A Citibank managing director thinks bitcoin could hit $318,000.