Maker cuts off Aave's DAI supply as fallout from Celsius continues
cointelegraph.comMakerDAO has voted to cut off lending platform Aave’s ability to generate DAI for its lending pool without collateral as the risks of Celsius’s liquidity crisis loom large over the entire crypto ecosystem.
The decentralized autonomous organization (DAO) made the decision as a means of mitigating the Maker protocol’s exposure to the beleaguered staking and lending platform in case Celsius goes belly up and implodes the stETH peg as well.
stETH is a token representing an amount of ETH that is staked on the Lido staking platform. Its peg to ETH has been wavering for several weeks and it’s currently trading about 6% below the price of ETH. Celsius invested a significant amount of user funds into stETH, which is reportedly one of the reasons it paused withdrawals.
The Maker Governance has voted to temporarily disable the @AaveAave DAI Direct Deposit Module (D3M).This change is available for execution on June 17 2022 21:03 UTC.https://t.co/3wKQiEvcMw
A June 14 governance proposal from DAO member prose11 suggested that the Maker protocol should temporarily disable the DAI Direct Deposit Module (D3M) for Aave because Celsius borrowed 100 million in DAI collateralized by stETH, which would be at risk of liquidation if Celsius fails.
The D3M allows Aave to stabilize the DAI loan interest rates by providing access to liquidity when needed. Aave’s D3M consists of 200 million DAI, 100 million of which have been borrowed by Celsius.
If Celsius does collapse, it might sell off its stETH to honor retail responsibilities and get liquidated on Aave, which would likely force stETH to depeg even further. This would put the Maker protocol at the risk of not being able to retrieve all the DAI Celsius borrowed.
Around 58% of the 83 voters on the
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