DAI as collateral

Today, one of the prominent Twitter Crypto accounts published hypothetical but detailed and realistic plan of de-pegging DAI. What is AAVE going to do to assess the risk and mitigate it? I’m sure that everyone who has got collateral in would be curious to know. Just to remind that similar plan was published months before UST and Luna collapse.


If no action is taken, collateralize USDC and take out loans in DAI and buy USDC

Can you link to the publication?

I’d like to see more discussion on this from delegates or contributors. Although unlikely, it is a systemic risk. A negative entity is able carry out this attack with enough capital.

In the thread, Adam provides a solution telling other to reduce the collateral factor of DAI. This isn’t a big change and should be carried out as insurance when compared to the fallout of a DAI depegging.

Better early than late. If there’s going to panic, better to panic first.

Full disclosure, I’m somewhat biased as a Maker risk contributor. But, I don’t think Adam laid out a feasible attack. For example, his attack plan seems to assume that PSM would be frozen (and not available as buy side liquidity to keep dai around peg), but then implies that an attacker could use PSM liquidity to acquire DAI which is obviously inconsistent.

Overall, I think this is just Adam threadoooring and not a serious risk to the Aave protocol. DAI maximum LTV and optimal utilization are also already below USDC which provides a significant additional margin of safety.

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Thanks for the clarification. Reading into it more, I think Rune also stated in the comments of the thread that the proposed attack was not feasible. Good to have a Maker risk contributor confirm though.

On another note, pretty sure there was an attempted bank run on Maker following the misunderstood news that the PSM was going to be used to market buy eth. While attacks will happen in the future, this instance speaks to the stability of DAI for now.