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Ethena crypto: MakerDAO brings debt ceiling to $1 billion

source-logo  en.cryptonomist.ch 09 April 2024 09:36, UTC

Crypto news: MakerDAO has increased the debt ceiling to 1 billion dollars for Dai allocations in the USDe and sUSDe markets through Ethena on Morpho. Initially, the allocation planned for these markets was 600 million dollars.

Let’s see all the details below.


Ethena on Morpho exploits MakerDAO’s debt increase: impact on the crypto ecosystem

As anticipated, MakerDAO has ratified a governance decision aimed at expanding the debt ceiling of its direct deposit module up to 1 billion dollars for its stablecoin Dai.

This initiative is focused on investments in Ethena (ENA +15.96%), USDe and its staking counterpart, sUSDe, through the lending vaults of Morpho Labs.

The increase in the debt ceiling is part of a broader strategy to diversify MakerDAO’s collateral exposure.

This represents a significant financial commitment with the Ethena stablecoin and allows the protocol to generate additional returns for users.

For these loan markets, initially 600 million dollars will be allocated from Dai holdings of MakerDAO, highlighting the strong commitment of the protocol towards Ethena’s USDe. Ethena.

This movement is facilitated by the Spark protocol of MakerDAO, which shows a preference for allocations to USDe pools over those for sUSDe.

Unlike traditional stablecoins, USDe uses a support mechanism that combines ETH and derivatives within a cash-and-carry trading framework.

This involves staking Ethereum collected by USDe minters and simultaneously implementing a shorting on ether futures, offering an innovative approach to supporting stablecoins.

The rise of USDe has sparked debates in the cryptocurrency sector regarding the associated risks, especially concerning the methods of generating returns.

In response to the recent MakerDAO allocation, a request has been made by a collaborator of Aave to reassess the risk parameters of Dai in Aave’s lending markets.

This suggests potential adjustments to the loan-to-value ratios for Dai-based loans. It is important to note that Aave represents a competitor to both MakerDAO and Morpho.

Tensions in DeFi: Aave DAO challenges MakerDAO with reform proposals

In the DeFi community, the recent moves by Aave DAO against MakerDAO are causing concern, highlighting potential divisions in the ecosystem.

The Aave lending protocol has proactively launched a strategy to mitigate risks related to the rapid expansion of the DAI stablecoin by MakerDAO.

The Aave Risk Framework Committee (ARFC) has proposed changes to the DAI risk parameters to protect the protocol from potential vulnerabilities.

The proposal, promoted by the Aave Chan Initiative (ACI) team, suggests a significant adjustment of the loan-to-value (LTV) ratio of DAI on all Aave implementations.

In particular, the proposed setting of a 0% LTV aims to mitigate the risks associated with MakerDAO’s aggressive D3M plan.

The rapid expansion of MakerDAO, which has brought its DAI credit line to about 600 million DAI in a month, presents significant challenges to the stability of DeFi.

Aave aims to maintain stability and protect user interests through adjusting risk parameters and incentive structures.

The proposed measures aim to minimize the potential risks associated with DAI deposits on Aave, offering users alternative collateral options such as USD Coin (USDC).

This strategic change reflects Aave’s commitment to risk management and resilience in the face of market volatility. In addition, the proposal recommends removing incentives for sDAI from the Merit program to reduce exposure to risks related to DAI.

The recent actions of Aave DAO highlight the organization’s commitment to governance integrity and community cohesion.

However, some external observers express concern about the potential consequences of this conflict on DeFi, emphasizing the importance of open collaboration to ensure the stability and progress of the sector.