ethereum based dai stablecoin price drop
Ethereum price drops caused by Stablecoin DAI
September 26, 2019
ethereum based dai stablecoin price drop
Ethereum price drops caused by Stablecoin DAI
September 26, 2019

Ethereum price drops losing more than 18% value under two hours due to collateralized stablecoin DAI. The stablecoin managed to maintain its peg to the United States dollar falling from $190 to $155 on Tuesday.

The sudden Ethereum price drops to highlight the weakness of DAI stablecoin built by the maker of MakerDAO, Dai (DAI) with the decentralized finance (DeFi) ecosystem within the platform. As of publishing time, Ethereum holds a price of about $170.

Higher transaction fees

DeFi Saver tweeted that due to heavy congestion in the Ethereum network it “struggled to execute all needed Collateralized Debt Position (CDP) ratio adjustments in time.”

Collateralized Debt Position (CDP) is “a type of loan administered by a smart contract central to the functioning of the DAI stablecoin.”

ALSO READ :  The Nexus Mutual Hacker Asks Ransom Demand For $2.66 Million In Ether

So far only ETH is accepted as a collateral for opening CDP even though MakerDAO is planning for adding other assets in its platform.

Collateralized Debt Position (CDP) helps in the creation of Dai against collateral which will be held until the DAI is returned.

The firm tweeted that:-

“MakerDAO has a mechanism in place that automatically liquidates CDPs once their collateralization ratio has dropped below 150%.”

An independent service is provided by the company that prevent the “automatic CDP liquidation built on top of MakerDAO’s ecosystem.”

Even though the company admits that due to transaction fees and network congestion the system  “failed to protect 2 monitored CDPs, which have been liquidated in the process.”

ALSO READ :  Archax Partners With Algorand To Help Bridge The Gap Between Decentralized And Centralized Finance

The company did announce that it will compensate the two users who were affected by the malfunctioning while adding:

“Although our automated protection is still in beta, our team is disappointed to have let some of our users down and we are willing to recuperate the losses suffered. […] We ask the owners of these two CDPs to please reach out.”


The company noted that “20 unique CDPs have been automatically protected by the system during this recent crash.”

When it was pointed out to Andrea Andreas Antonopoulos, author of Mastering Bitcoin that the current DeFi ecosystem is not working properly.

“Not really. It seems like DAI maintained the price parity, the CDP protection contracts worked in all but two cases. This was a good test and things worked pretty well.”

Andreas Antonopoulos, author of Mastering Bitcoin

The company, later on, went to say that the current automation is working properly due to adjusting to the current transaction fees.

ALSO READ :  PayPal Acquires Israel-Based Crypto Custody Firm Curv For An Undisclosed Amount


Crypto News Point a news platform of Digital Notice Media Labs is primarily a regular publication of information, commentary and articles focused extensively on fintech, blockchain technology, cryptocurrency, blockchain-based tokens, cryptocurrency market trends, and trading strategies. We do not provide individually tailored investment advice and does not take a subscriber’s or anyone’s circumstances into consideration when discussing investments, nor is Crypto News Point registered as an investment adviser or broker-dealer in any jurisdiction. Information contained herein is not an offer or solicitation to buy, hold, or sell any digital assets.

Affiliate Disclosure: To help support the work we do here at CNP, we often link to products and deals from around the web. Should you buy some of these, we may get a portion of the sale.

We in generally gather content from the major websites. In every article there is always a clear link and attribution to the source publication. If you have any issue with any of our published content taken from your site, kindly let us know so that we can take appropriate action. In any case, the content of the pages of this website is for your general information and use only. It is subject to change without notice.

You May Also like

Bitcoin Car Will Be Racing In Indianapolis 500 In May

Bitcoin Car Will Be Racing In Indianapolis 500 In May

Bitcoin car, the car branded with the Bitcoin logo, will be racing in circles against 32 others in this month’s Indianapolis 500. It has been reported by Jack Mallers, the CEO of Zap, that US racing driver Ed...

Jafrin Ahmed

Crypto newbie passionate about creating resourceful content on blockchain technology, cryptocurrencies and decentralized apps.