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DeFi Ecosystem in Danger Due to DAI Stablecoin Dominance, Investor Warns

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Tue, 04/21/2020 - 13:52
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Vladislav Sopov
Adam Cochran, partner in Metacartel Ventures DAO, explains why he treats the DAI stablecoin as a ‘time bomb’ under the decentralized finance ecosystem
DeFi Ecosystem in Danger Due to DAI Stablecoin Dominance, Investor Warns
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As a former DAI and MakerDAO champion, Mr. Cochran has revealed three main indicators that one stablecoin poses a huge threat to the sanity of decentralized finances worldwide.

One more house of cards

According to Mr. Cochran, DeFi institutions look like a Lego made of interconnected elements with one common basic detail, the DAI stablecoin. That said, it is this stablecoin that acts as the weakest point of vulnerability.

All systems based on a single asset need to rely on the fair nature of its emission, trusted origin and proper transferring. Should the asset fail to meet these requirements, all DeFi clients would need to brace themselves for another multi-million hack. 

The recent dForce attack, which was caused by the vulnerability of the imBTC-ETH interaction, is a textbook example of such misconduct.

Red flags of (de-?)centralization

The modus operandi of the team behind DAI stablecoin is also alarming for the expert. He highlighted the whale-dominated structure of its token allocation, several governance failures, lack of transparency and even attempts to trademark the word ‘DeFi’.

 

Furthermore, the shady nature of collateralization that includes assets with high volatility looks rather disturbing for Mr. Cochran. It is one more room for the manipulations, he admits. Although, he knows no alternative for DAI that is active at the moment.

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About the author

Blockchain Analyst & Writer with scientific background. 6+ years in IT-analytics, 3+ years in blockchain.

Worked in independent analysis as well as in start-ups (Swap.online, Monoreto, Attic Lab etc.)