MakerDAO votes to discontinue the use of renBTC as collateral tied to Alameda
MakerDAO voted in favour of removing renBTC from stablecoin collateral vaults.
MakerDAO, the issuer of the Dai stablecoin, approved a governance motion to eliminate renBTC as collateral and decrease exposure to what the DAO deems a hazardous asset. RenBTC is a bitcoin-backed asset created by the Alameda Research-backed Ren Protocol initiative.
MakerDAO enables users to mint the stablecoin dai by depositing additional bitcoin collateral. MakerDAO allows users to store renBTC tokens in “RENBTC-A” vaults and mint dai as of December 2020.
Alameda Research, the sister trading organization of the FTX exchange, purchased the Ren project earlier this year and supported its quarterly development. After Alameda and the FTX exchange filed for Chapter 11 bankruptcy protection, the Ren team announced that its previous tokenized bitcoin product, Ren 1.0, will be discontinued and replaced with a new community-run Ren 2.0.
The Ren team said that it had one runway remaining to complete before the end of the year. In the meanwhile, it has halted renBTC issuance and requested that users burn the circulating tokens on Ethereum before claiming them on the original chain. To reach this second version of Ren, the team will need extra funds, according to the statement.
In reaction to this event, the “risk core unit” team of MakerDAO highlighted that because mints were banned, renBTC risked the possibility of losing its pegged value to bitcoin. The company then suggested shutting renBTC vaults and liquidating loan holdings.
Maker Governance opted to decommission the RENBTC-A vault type because of the unpredictability surrounding the Ren Protocol, at the suggestion of the Risk Core Unit, MakerDAO said.
Yesterday, this motion was approved with 100 percent of MakerDAO delegates voting in its favour. London Business School Blockchain, a MakerDAO delegate, said, “With Alameda filing for bankruptcy and the increased possibility of renBTC depegging, we endorse offboarding renBTC as collateral to reduce platform risk.”
Multiple renBTC vaults on Maker have now lent more than 850,000 dai. According to the accepted vote, these posts will be eliminated beginning December 7. This position’s liquidation ratio will be set at 5,000%. Maker’s risk unit said in the plan that a high collateral ratio assures liquidations would occur.