Ethereum worth $ 8 million was sold for $ 0

March 12, 2020 became the “Black Thursday” for the crypto market, due to a flash crash that affected most of the ecosystem. For MakerDAO, however, it was a disaster that resulted in the loss of Ethereum worth $ 8 million.

According to a report by Glassnode, the collapse of the ETH price by 43% has led to unwanted consequences for the MakerDAO ecosystem. Some liquidators were able to buy a huge amount of DAI for $ 0.

The decrease in the ETH price has resulted in network congestion, an increase in taxes and a rise in gas prices. Users have tried to react to lower prices and have practically blocked the Ethereum network.

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During the network congestion, the average gas price exploded, from 80 to 200 Gwei. Unconfirmed transactions made MakerDAO and Chainlink prices unable to be updated fast enough to keep pace with the rapidly falling Ether price.

Maker’s Oracle Medianizer showed a $ 30 price difference during peak congestion. This gave network participants the opportunity to pay for their Maker CDPs, which would otherwise have been liquidated. These participants paid high gas taxes and saved their CDPs. And when the price was finally updated, many CDPs (collateral) were suddenly liquidated in mass.

Ethereum worth $ 8 million “evaporated”

When the Maker CDPs are liquidated, the cryptocurrencies are auctioned by the Maker, and the owners should receive a 13% liquidation penalty. However, that day, because gas prices were so high and the tail of transactions so long, the bids were not processed fast enough.

A liquidator, probably a muzzle, took advantage of the situation and a won these auctions with a zero DAI bid.

According to Glassnode, Ethereum worth $ 8 million was sold for $ 0 in DAI. The end result was that DAI worth at least $ 4.5 million was no longer covered by collateral.

The users whose deposits were liquidated did not receive that 13% because the value of the liquidation was zero.

Following the incident, MakerDao voted and decided to increase the maximum size of the settlement lot from 50 to 500 ETH. The duration of the auctions was also increased.

The Maker community is now considering issuing and bidding new MKR tokens for DAI re-collateralization. It was also proposed to reduce the Dai saving rate (DSR) and the overall stability tax to bring the DAI price close to $ 1.