MakerDAO, a leading Ethereum (ETH)-based decentralized finance (DeFi) platform, is currently in the process of carrying out an auction of MKR governance tokens in exchange for stablecoin Dai, in an attempt to cover around $4.5 million undercollateralized debt.
On-chain (blockchain) data reveals that the Maker Foundation, a non-profit entity supporting the ongoing development of MakerDAO, has been taking part in several auctions meant to cover millions of dollars in undercollateralized system debt – which has recently been created. The Maker Foundation appears to have won all the auctions conducted so far.
The MKR token auction had been initiated when approximately $4.5 million worth of undercollateralized debt was created after several liquidators managed to win collateral liquidation auctions by putting up 0 Dai, which is a stablecoin issued in exchange for depositing Ether (ETH) as collateral in the MakerDAO lending system.
After locking their Ether, the MakerDAO system gives borrowers a loan in Dai, which aims to maintain a soft peg to the US dollar. In addition to ETH, users can deposit Basic Attention Tokens (BAT) or stablecoin USDC as collateral. Following the sharp decline in the Ether price and other crypto assets on March 12, a large number of loans dropped below their minimum 150% collateralization threshold.
The auction involves creating and selling off MKR, which is MakerDAO’s governance token, in exchange for stablecoin Dai. The capital raised in this manner will reportedly be used to settle the debt. Those who take part in the auction will have to commit to providing as much as 50,000 Dai, and they could receive up to 250 MKR tokens if they succeed.
The auction reportedly began on March 19 at about 10:30 am ET. So far, 33 auctions have been carried out. Available data reveals that the Maker Foundation seems to have won all of the auctions conducted so far.
In statements shared with The Block, the MakerDAO Foundation stated that it “has…