The saga of the stable-ish coin Dia continued this week with the revelation that 90% of the debt is concentrated in 250 Collateralised Deposit Positions (CDP).
Dia is issued by a decentralised autonomous organisation called MakerDAO. Users deposit Ethereum and can borrow Dia which is pegged to 1 USD. The MakerDAO team tries to keep the one dollar peg by changing the interest rate paid by depositors. For the past few months supply of Dia has outpaced demand and Dia has hovered between $0.96 and $0.98.
Who knew that running a central bank was so difficult?
In this week’s governance meeting,
Primoz Kordez, founder of blockchain analytics firm Block Analitica, shared new figures about Dia debt concentration in the MakerDAO system. Kordez highlighted that while there are over 2,000 active loans – also called Collateralized Debt Positions (CDPs) – currently taken out by users, about 90 percent of all debt is actually concentrated in roughly 250 CDPs.
Although there are 250 big contracts it is possible that many of these are controlled by the same individuals. In varying the interest rates MakerDAO is ‘pretending’ that a macroeconomic model can be applied to what is a highly centralised system with a few major participants. In this scenario interest rates are not the best way of transmitting information,
I suspect that the challenges faced by MakerDAO are similar to that of many small currencies. How do small central banks manage supply and demand? If you know then please comment below.