An auction to recapitalize MakerDAO (MKR) after the successful conclusion of the mid-March market turmoil on March 28, bringing in DAI worth more than $5 million. In a March 31 tweet, the Crypto venture fund Paradigm Capital revealed that it won about 68 percent of the auctioned tokens.
Previously, the company had pledged to join a “backstop syndicate,” and if necessary, cover the entire system shortfall. Acting as a so-called “backstop,” if their price fell to $100, the group would act as the buyer of last resort by buying the MKR tokens. (The starting price for the auction was $200 and the actual market price is $288.)
Many prominent members of the decentralized finance (DeFi) community joined the syndicate, ensuring that Paradigm wasn’t alone in its effort to preserve the functionality of MakerDAO. But the backstop was in the end unnecessary as the auction quickly found lots of bidders. Some community members claimed the lots were purchased by the Maker Foundation, as most of the bids came from a select few addresses.
The foundation responded by saying it provided “limited technical assistance to some bidders.” It is unknown whether Paradigm, a major investor in the Maker Foundation, needed the assistance. The fund’s representatives did not immediately respond to a request for comment. When we learn more the article will be updated.
The System is Recapitalized
The collapse of the Black Thursday market had two sides to it with losses. At a protocol level, MakerDAO became undercollateralized by $5 million as the collateral bids for zero DAI clearly did not return a sufficient amount of DAI to Maker, jeopardizing its peg’s stability to the US dollar. Though market events actually broke the peg in the opposite direction as DAI traded at a premium.
While the auction successfully recapitalized the system, individual users who have been liquidated have lost more than the 13 percent advertised by MakerDAO, and they have not yet been compensated. Its total losses range from an estimated $1 million to $3 million.
The MakerDAO community is currently in the process of deciding how much money token holders, if anything, should return to the users.