MakerDAO’s global governance community is critical in helping to maintain Dai’s soft peg to the US Dollar and safeguarding the robustness of the Maker Protocol. Every week, MKR holders participate in Polls and Executive Votes as part of the regular Governance Cycle. To help inform their decision-making, voters have at their disposal multiple resources to stay updated on Dai generation and stability, and other aspects of the Maker Protocol.
While part one of the Informed Voting series, 4 Key Tools for Assisting MakerDAO Governance Decision-Making, detailed four resources that provide context for Maker voting, and part two, 4 Top Resources for Analyzing Dai Markets, explored four community-developed websites that aggregate exchange information and help the Maker Community monitor Dai, this final post looks at resources that offer insights into the Maker Protocol’s collateral reserves and Vault liquidations.
The Importance of the Liquidations System of the Maker Protocol
Maker’s updated Liquidations System, approved by Maker governance last month, is intended to help maintain the necessary level of collateralization for all Dai generated by users in Maker Vaults. Over-collateralization of the Protocol helps Dai maintain its soft peg to the US Dollar. When the value of Vault collateral falls below the minimum set by Maker governance, a collateral auction is held to cover both the debt and a Liquidation Penalty (also set by governance).
Liquidations 2.0 is designed to be easier to use, more efficient and secure than the previous version, and should create greater opportunities for anyone to participate in auctions.
Four Resources for Monitoring Collateral and Auctions
The transparency of the blockchain means that a huge amount of useful information about the Maker Protocol is publicly available. But because data regarding the health of the Protocol is not always easy to understand in its raw form, several resources have been created that present those valuable insights in visually appealing ways:
Listed in part one of the Informed Voting series, @MakerDaiBot live-tweets summaries of relevant statistics regarding the Maker Protocol. It is a good source of real-time information regarding Dai generations and burns, as well as ongoing liquidations.
Descipher.io is a community-created site that displays information about the amount of Dai generated against each collateral asset in the Protocol, providing insights based on the current market price of collateral and Maker Vaults’ aggregated Collateralization Ratios (CRs).
Users choose an asset from a dropdown menu at the top of the page, and are then presented with valuable information. The graph on the left shows the amount of Dai that currently exists at different CRs; the graph on the right shows the amount of Dai that would need to be recovered by liquidations should the price of collateral fall; and the chart below the graphs lists every Vault for the selected collateral asset, from the largest to the smallest.
MakerVaults.descipher.io is a powerful tool that attempts to forecast areas of particular risk in the event of a dip in collateral prices, which may cause the liquidation of large Vaults.
Another popular resource, Daistats, which is also listed in part one of the Informed Voting series, contains a wealth of information about many different aspects of the Maker Protocol. Included are the number of Vault liquidations that have occurred for every collateral type since integration with Liquidations 2.0. For additional information, read the Guide to Dai Stats.
The updated Liquidations System, which introduced a Dutch auction model into Maker’s collateral auctions, intends to make Vault liquidations more efficient and more accessible to users.
The Liquidations 2.0 interface lists every active collateral auction, enabling users to monitor the status of ongoing liquidations and purchase collateral being auctioned using MetaMask. In the Dutch auction model, bids decrease over time rather than increase, meaning that the first bid made at the asking price will win the auction.
Empowering Data-driven Governance
Dai stability relies on Maker governance to maintain adequate Collateralization Ratios and on the Protocol to efficiently facilitate liquidations. Maker’s new Liquidations System intends to enable auctions to scale as Dai demand increases, helping to ensure that all Dai is fully collateralized and that the Maker Protocol can meet the needs of the fast-expanding DeFi sector.
On-chain Governance Polls establish consensus for future development, and Executive Votes ultimately result in changes to the Protocol. Anyone can participate in Maker’s open governance process, which begins on the MakerDAO Forum with discussions covering every aspect of the Protocol and informal (non-binding) polls.