The Decision to Isolate Aave
MakerDAO recently voted to temporarily disable Aave's DAI Direct Deposit Module (D3M) as a preventive measure against potential risks stemming from Celsius Network's liquidity crisis. The move aims to shield the Maker ecosystem from cascading effects should Celsius fail and destabilize the stETH (staked ETH) peg.
"Maker Governance has voted to temporarily disable Aave's DAI Direct Deposit Module. This change will be executable on June 17, 2022, at 21:03 UTC."
— @MakerDAO
Why stETH Matters
- stETH Peg Instability: stETH currently trades at a 6% discount to ETH, signaling market stress.
- Historical Precedents: Loss of pegs by Waves-based stablecoins (May 2022) and Terra's UST (June 2022) demonstrate systemic risks.
- Celsius Exposure: Celsius borrowed 100M DAI using stETH as collateral. A collapse could trigger liquidations, further depegging stETH and endangering MakerDAO's liquidity.
👉 How DeFi Protocols Manage Risk
Governance Vote Breakdown
- Proposal Author: MakerDAO member "prose11" (June 14, 2022).
- Key Argument: Celsius’s potential failure poses greater risks than revenue loss from disabling Aave’s D3M.
- Vote Outcome: 83 voters approved the proposal with an 83% majority.
- Effective Date: June 17, 2022, 21:03 UTC.
FAQ Section
Q: What is the DAI Direct Deposit Module (D3M)?
A: A smart contract allowing Aave to mint DAI directly, streamlining liquidity provisioning.
Q: How does Celsius’s collapse affect MakerDAO?
A: Celsius’s stETH-backed loans could face liquidation, destabilizing the stETH-ETH peg and jeopardizing DAI repayment.
Q: Are other DeFi protocols taking similar actions?
A: Yes. Protocols like Lido and Curve have implemented additional safeguards against peg volatility.
👉 Understanding DeFi Risk Management
Key Takeaways
- Preemptive Action: MakerDAO prioritizes ecosystem stability over short-term gains.
- Lessons from Past Crises: The Terra and Waves collapses informed this defensive move.
- Governance Efficiency: Rapid voting (3 days) highlights decentralized decision-making.