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Aave votes to pause ETH borrowing following concerns of users trying to maximize ETHPoW airdrops

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Aave votes to pause ETH borrowing following concerns of users trying to maximize ETHPoW airdrops

Aave votes to pause ETH borrowing following concerns of users trying to maximize ETHPoW airdrops Liam ‘Akiba’ Wright · 30 seconds ago · 2 min read

A governance proposal on Aave has been passed to suspend ETH borrowing following detailed simulations of high utilization of ETH caused by users attempting to receive an ETHPoW airdrop.

2 min read

Updated: September 7, 2022 at 1:19 am

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Cover art/illustration via CryptoSlate

Aave has voted to suspend Ethereum borrowing ahead of The Merge in a vote that received a 77.87% majority in favor. The governance proposal stated,

“A proposal to pause ETH borrowing in the period leading up to the Ethereum Merge…

Ahead of the Ethereum Merge, the Aave protocol faces the risk of high utilization in the ETH market. Temporarily pausing ETH borrowing will mitigate this risk of high utilization.”

The proposal stated that the motivation for the move was to protect against “high utilization in the ETH market.” There was a fear that this would be caused by “users potentially benefiting from the forked PoW ETH (ETHW) by borrowing ETH before the merge.”

Interestingly, Aave has not voted to pause activity on the Ethereum network altogether, simply to pause ETH borrowing. The proposal does not mention concern over The Merge itself but that speculators could artificially increase demand beyond tolerable levels.

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The proposal also explained how a high borrow rate could lead to “stETH/ETH recursive positions [becoming] unprofitable, increasing the chances that users unwind their positions and driving the stETH/ETH price deviation further, causing additional liquidations and insolvency.” Further information on the proposal can be found on the governance forum.

Data on the forum included a simulation of the stETH at risk should borrowing be left on. According to the chart, a depeg of 15% would unlikely cause major liquidations on the Aave platform. However, should the peg establish a deviation of 50%, there could be liquidations of over $500 million.

stETH at Risk (Source: Aave)

Further, analyzing wallets using the Aave platform resulted in discovering some “unusual behavior of users building ETH/ETH recursive positions.” The rationale for such a strategy would be to maximize ETH exposure to take advantage of any ETHPoW fork.

Additional risks and scenarios that resulted in a call for a governance proposal to pause ETH borrowing are outlined in detail on the governance forum. However, it appears that the DAO is performing well in working to protect the DeFI platform and self-govern.

There is no centralized directive in play forcing changes to the platform. Governance token holders raised a potential concern, and the community voted to protect the market’s best interests. The proposal is available for deployment from 1 am BST on Wednesday.

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Posted In: Aave, DAOs, DeFi, Merge

$700 million

Despite The Crypto Market Downturn, DAO Treasuries Grew By $700 Million Since January

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Despite The Crypto Market Downturn, DAO Treasuries Grew By $700 Million Since January

Since January 2022, the entire crypto economy has shed $1.36 trillion in value, as the market capitalization dropped from $2.34 trillion to today’s $979 billion. While the crypto economy is down in value, trade volumes are lower, and the value locked in decentralized finance (defi) has shed billions, treasuries held by decentralized autonomous organizations (DAOs) have increased by 7.69% in value since January, as roughly $700 million was added to the projects’ caches in eight months.

DAO Treasuries Jump 7.6% Higher in USD Value, Since 2016 the Value Held by Decentralized Autonomous Organizations Grew by 6,025%

On June 10, 2022, the total amount of funds held by decentralized autonomous organization (DAO) treasuries reached the $10 billion range for the first time in history. While the crypto industry is dealing with lower prices and bearish sentiment, the value held by DAO treasuries has managed to weather the storm.

Presently, across 4,830 organizations, DAOs hold $9.8 billion, which is only $200 million less than the aggregate value held by DAOs 112 days ago. While it is $200 million less than it was three months ago, DAO treasury values have increased by $700 million since January, according to stats aggregated by deepdao.io.

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On January 22, deepdao.io metrics recorded by archive.org indicate there were 4,227 organizations at that time, and collectively, $9.1 billion was held in DAO treasuries. With $9.8 billion today, that’s a 7.69% increase in USD value held by DAO treasuries over the last 251 days.

At the time, Bitdao held $2.4 billion in its treasury and it was the largest DAO treasury in January. Uniswap was the second largest at the time, with $2.1 billion. Both Bitdao and Uniswap are still the top two DAOs in terms of treasury size, but Uniswap is now the largest.

On October 1, Uniswap has $2.8 billion, while Bitdao’s cache has shrunk to $1.3 billion from the $2.4 billion held at the beginning of the year. Bitdao’s $1.3 billion makes it the second largest DAO treasury and it’s followed by ENS which holds roughly $1.2 billion.

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251 days ago, ENS was the 14th largest and at the time, the third largest was Lido Finance. The liquid staking protocol’s DAO is now the fifth largest, with $283 million held in the Lido DAO today. The top ten DAO treasuries include Uniswap, Bitdao, ENS, Gnosis, Lido, Olympus DAO, Mango DAO, Merit Circle, Compound, and Aragon Network.

Out of the entire $9.8 billion, there are 3.9 million governance token holders, and 698,400 active voters and proposal makers. 109 DAOs hold $1 million or more, while only three DAOs have more than a billion in funds.

While Uniswap has $2.7 billion, 98.7% of the project’s treasury funds are held in uniswap (UNI) tokens, and Bitdao has a treasury comprised of a bunch of different crypto assets which include tokens like BIT, ETH, USDC, and USDT.

As the crypto economy continues to deal with tumultuous times, decentralized autonomous organization treasuries have seen steadfast growth since the start of the year. Since the first DAO was created in 2016, DAO treasuries have increased 6,025% in USD value during the last six years.

Tags in this story

$700 million, $9.8 billion, 2016, 2022, Aragon Network, Bitdao, Blockchain, Compound, Crypto, crypto downturn, DAO, DAO Treasuries, DAO Treasury, DAOs, decentralized autonomous organization, decentralized finance, DeFi, ENS, ETH, Gnosis, governance tokens, Lido, Mango DAO, Markets, Merit Circle, Olympus DAO, UNI, uniswap

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What do you think about the thousands of DAOs today and the $9.8 billion held by DAO treasuries? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Ooki DAO moves to raise funds to defend against CFTC lawsuit

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Ooki DAO moves to raise funds to defend against CFTC lawsuit

Ooki DAO moves to raise funds to defend against CFTC lawsuit Christian Nwobodo · 5 hours ago · 2 min read

Ongoing discussions in the Ooki DAO forum have outlined three action plans to help the community raise funds to respond to the CFTC’s complaint. 

2 min read

Updated: September 29, 2022 at 1:41 pm

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Cover art/illustration via CryptoSlate

Ooki DAO community members have commenced discussions to explore possible fundraising options to defend their case against the CFTC.

The Commodity Futures Trading Commission (CFTC) had on Sept. 27 filed a lawsuit claiming that Ooki DAO’s leverage and margin trading services were illegal.

Consequently, voting members of the DAO are considered liable to face sanctions for allegedly violating the provisions of the Commodities Exchange Act (CEA).

Ongoing discussions in the Ooki DAO forum have outlined three action plans to help the community raise funds to respond to the CFTC’s complaint.

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To bootstrap internally, DAO members could approve the withdrawal of funds from the Ooki treasury. The funds will be used to hire legal counsels that will represent accused Ooki DAO members.

In seeking external funding, Ooki DAO could submit a Gitcoin grant request for members of the crypto community to support its legal defense.

According to the discussion, Ooki DAO’s plan to receive donations from the broader community is important as the outcome of the ongoing case would shape the future of other DAOs offering DeFi services.

“the outcome of the Ooki DAO CFTC case could serve as a precedent for other DAOs in the cryptocurrency space and have far-reaching implications for the entire cryptocurrency space as it pertains to the liability of DAO voting members. “

A third funding option would be to mint and sell NFTs in support of the Ooki DAO legal defense.

Community backs funding plans

So far, Ooki DAO members engaged in the discussion have unanimously agreed to the propositions.

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Some have offered to contribute to the legal fees, while others agree that the broader crypto community should come together to defend the future of DeFi regulation.

There is still time to help shape the future of DeFi regulation. Let’s come together and decide the next course of action.

Delphi Digital General Counsel Gabriel Shapiro has advised the DAO to respond within 21 days to avoid automatically losing to the CFTC.

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Circle

MakerDAO founder proposes converting $3.5B USDC reserve to Ethereum

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MakerDAO founder proposes converting $3.5B USDC reserve to Ethereum

MakerDAO founder proposes converting $3.5B USDC reserve to Ethereum Oluwapelumi Adejumo · 3 hours ago · 2 min read

Buterin has called MakerDAO’s idea of converting its reserve into Ethereum a “risky and terrible idea.”

2 min read

Updated: August 12, 2022 at 9:57 am

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Cover art/illustration via CryptoSlate

MakerDAO (MKR) founder Rune Christensen has asked DAO members to consider converting its $3.5 billion USDC reserves to Ethereum (ETH) because of the extent of the Tornado Cash sanctions.

MakerDAO is considering a $3.5 billion ETH market buy, converting all USDC from the peg stability module into ETH.

— banteg (@bantg) August 11, 2022

Christensen made this suggestion via the DAO Discord group stating that additional research has shown him that the consequences of Tornado Cash sanction are more severe than initially thought.

rune: we should seriously consider depegging from usd pic.twitter.com/HBMrPH7LrW

— banteg (@bantg) August 11, 2022

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“I think we should seriously consider preparing to depeg from USD. It is almost inevitable it will happen and it is only realistic to do with huge amounts of preparation.”

Meanwhile, Christensen later clarified that he intended a “partial Yolo” in which Maker buys ETH with some of its USDC collateral. He believes it is an option worth considering following the Tornado Cash embargo.

Yes, I think slowly DCA’ing some collateral into ETH is an option that can be considered depending on the severity of the blacklisting risk, which I personally think is much higher after the TC blacklist… it would exchange blacklist risk for depeg and haircut risk

— Rune (@RuneKek) August 11, 2022

Circle blacklist function fears

With about 40% of DAI reserve held in USDC, the protocol fears a situation where it could be affected by Circle’s sanctions.

In light of the recent blacklistings of USDC addresses there is no surprise that they’re considering de-risking and decentralizing by dumping their USDC holdings

Their potential approach of YOLO buying $3.5B worth of ETH seems crazy though

— Lucky (@Lucky_2147) August 11, 2022

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However, converting $3.5 billion worth of its reserves into Ethereum also presents a risk of DAI de-pegging from USD — given the volatile nature of ETH and other cryptocurrencies.

Circle had blocked the 44 wallets sanctioned by the US Office of Foreign Assets Control.

The stablecoin issuer conceded that its action was against the ethos of an open internet. However, it had to make a move to comply with existing laws.

Crypto community compares the idea to Terra

Crypto community members are already comparing MakerDAO’s idea to Terra ecosystem Bitcoin (BTC) purchase.

if true, this is Do Kwon level

you don’t announce a buy like this and then do it all at once

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— DCinvestor.eth ⌐◨-◨ (@iamDCinvestor) August 11, 2022

Remember Terra / ust and btc collateral 😉

— JamieD’s BitcoinFraud (@ElPako81465943) August 11, 2022

pic.twitter.com/i69urmdqGH

— Dylan LeClair 🟠 (@DylanLeClair_) August 11, 2022

Why does this immediately remind of when and where (price action wise) of LFG’s BTC purchase?

— Tasal (@0xTasal) August 11, 2022

Buterin rejects the $3.5B ETH purchase idea

Ethereum co-founder Vitalik Buterin does not think Maker’s idea is good. According to Buterin, it “seems like a risky and terrible idea” because it places the whole system at risk, especially if the value of ETH drops.

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Errr this seems like a risky and terrible idea. If ETH drops a lot, value of collateral would go way down but CDPs would not get liquidated, so the whole system would risk becoming a fractional reserve.

— vitalik.eth (@VitalikButerin) August 11, 2022

Instead, Vitalik suggested a diversification of stables as collateral. According to him, non-ETH collateral should not exceed 20% of the total or possibly limit the collateral to a maximum of 20% in each jurisdiction.

Personally I think no single type of non-ETH collateral should be allowed to exceed 20% of the total. Maybe even limit to max 20% in any single jurisdiction.

And if you can’t do that, put a limit on DAI’s growth (eg. by adding a negative interest rate) until you can.

— vitalik.eth (@VitalikButerin) August 11, 2022

Buterin continued that the reserve diversification could be “19% USDC, 19% some euro thing, 19% something out of Singapore?”

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19% usdc, 19% some euro thing, 19% something out of Singapore?

— vitalik.eth (@VitalikButerin) August 11, 2022

Posted In: Ethereum, DAOs

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