MakerDAO Authorizes USD Coin (USDC) As Collateral

The MakerDAO governance has officially approved the USD Coin (USDC) stablecoin as the third collateral type that is accepted in the Maker Protocol, as a community post published on March 17 showed. As we can see, MakerDAO authorizes the USDC stablecoin after an extraordinary executive vote outside of the usual weekly schedule occurred, following last week’s market instability.

Now, USDC joins Ether (ETH) and Basic Attention Token (BAT) in the latest cryptocurrencies news as tokens that are accepted forms of collateral which can be used to open vaults and generate the DAI stablecoin.

The move also follows extensive discussion in the Maker community on the merits of adding USDC, and the appropriate risk parameters for the token. We could also see a public discussion of the potential impact of adding a centralized stablecoin as a collateral type.

Anyways, MakerDAO authorizes USD Coin and the community behind the project decided that the swift addition of USDC might address the DAI price instability and potential liquidity issues that have been prevalent since the Ether market crash which occurred last Thursday.

Meanwhile, the Maker Protocol is known in the altcoin news as one that allows users to generate DAI by locking collateral into a smart contract or a vault. The unprecedented price drop of Ether last week caused the collateral value in many vaults to drop beneath the generated DAI value, which in turn triggered a lot of liquidations.

While the Maker Protocol has a lot of mechanisms in place for such events, the scale of this massive sell-off led to these not functioning as intended. In (at least) one case, the liquidated collateral was auctioned off for 0 DAI.

The eventual debt, on the other hand, after consuming all DAI in the buffer, was estimated at around $4 million. This is why MakerDAO authorizes USDC – at least one of the reasons – and how it officially added the token as a collateral type on March 16.

Since USDC is a coin known as one that is not exposed to market instability, it is also a cryptocurrency that is considered relatively stable. Currently, the coin is at $0.97 and only a few cents away from its dollar-pegged mark at $1.