In a Wednesday tweet, MakerDAO shared some development updates on the DAI Backstop Syndicate.
According to the MakerDAO tweet on the Dai Backstop Syndicate said: “the #Dai Backstop Syndicate will create a protective net for the Maker Protocol, showcasing a prime example of the #DeFi community coming together to address challenges in the sector”.
This shows that the Dai Backstop Syndicate focuses on decentralization. MakerDAO has also shared a report concerning the development of the Dai Backstop Syndicate. Maker Protocol, however, is the foundation behind this entire framework.
About Maker Protocol
The Maker Protocol is the brain behind MakerDAO and all its components. These include the MakerDAO decentralized Dai stablecoin, oracles, governance, vaults, and the decentralized finance (DeFi) ecosystem.
The Maker Protocol has a clear focus on blockchain technology, smart contracts, and most especially, the aspect of Decentralized Finance (DeFi). They are also passionate concerning individuals that stake in the Maker community and in the DeFi movement.
However, March 12 witnessed a drastic price drop in Ethereum (ETH). This price drop led to a chain of events that resulted in the extreme shortage of Dai. This, however, was a matter of great concern for Maker community, globally.
In response to this situation, a new group was organized within 24 hours of the ETH price crash. This group formed the background of the Dai Backstop Syndicate, a self-organized group that focuses on preferring solutions to bring the community together.
Dai Backstop Syndicate: working towards decentralization
The ETH price crash led to the formation of the group. There were heavy selling of digital assets and traders began to seek the US Dollar as a safe haven.
The Maker community quickly responded to these issues by coming together on social media and in the Maker Forum, in order to discuss the solutions concerning the issue. By March 13, an independent group which called itself the Dai Backstop Syndicate was organized and they pledged to conquer the negative surplus in the Maker Protocol, if there is a need.
They however, decided to work with the Maker’s debt auctions. On a regular, the auction was for everyone and the minimum bid was 50,000 Dai. Since some individuals could not reach the minimum bid, the Dai Backstop Syndicate stepped in and they empowered the smaller individuals to participate in the bid through a smart contract.
This auction was successful even without any bidding from the self-organized group. The Daily Backstop Syndicate, however, still continues to function in case the need arises again.
Previously, MakerDao called for a meeting. It was specifically to decide introducing USDC to serve as collateral against liquidity risk is a good idea.