Original author: Three Sigma Paper Imperium
Original translation: Shenzhen, PANews
MakerDAO recently had an unexpected emergency governance proposal. Without any warning, the proposal quickly entered the voting process and has been passed (but is still in the time lock stage). This proposal not only significantly increased the lending limit of MKR tokens, but also significantly reduced the collateral requirements, which triggered widespread doubts in the community about the transparency and fairness of governance.
Proposal highlights: Comprehensive adjustments from debt ceiling to mortgage rates
According to the LSE-MKR-A risk parameter changes announced by the forum, the core content of the proposal includes:
• Maximum debt ceiling (line)
Increased from 25 million USDS to 45 million USDS
• Target available debt (gap)
Increased from 5 million USDS to 45 million USDS at one time
• Debt ceiling increase cooldown (ttl)
Reduced from 36 hours to 20 hours
• Stability Fee
Increased from 12% to 20%
• Liquidation Ratio
Significantly reduced from 200% to 125%
• Liquidation Penalty
Reduced from 5% to 0%
In addition, the proposal also reduces the GSM Pause Delay from the original 30 hours to 18 hours, which means that the response time for contract execution will be further shortened at the governance level in the future.
These parameter adjustments essentially allow MKR tokens to be used as collateral to obtain higher loan amounts (more than 2 times the previous amount) and allow higher leverage (collateral ratio reduced from 200% to 125%). At the same time, the liquidation penalty has also been reduced to 0%, significantly reducing the cost of being liquidated.
Official statement: Is it really possible to prevent governance attacks?
Defensive Reasoning vs. Obscure Attack Vectors
Both the initiator of the proposal and some official channels attributed the urgency of this proposal to preventing potential governance attacks. However, many community members, including PaperImperium, pointed out that no known, ongoing specific attacks have been found. The community still has many doubts about whether this proposal can truly resist the so-called governance attack and whether there are deeper motives.
Questioners were banned
The most controversial thing is that during the voting period, many users and institutions (such as GFX Labs) who held opposing or questioning positions were banned or blocked on official channels such as Discord and forums. PaperImperium said that his personal Discord account and GFX Labs forum account were also banned during this period, and questioning voices were difficult to continue to ferment on official channels.
Multiple perspectives: Who is benefiting and who is questioning?
Short-term beneficiaries: high leverage and high liquidity
• Large households or institutions
With the help of this proposal, users who hold large amounts of MKR can more easily borrow more USDS from the Maker Protocol, while the reduction in the collateral ratio also allows them to obtain higher leverage with less capital.
• High-risk speculators
For traders willing to take higher risks, lower liquidation penalties and higher leverage undoubtedly provide more room for maneuver.
Long-term risks: potential shocks to governance and financial security
• Governance centralization and transparency
Bypassing normal procedures and quickly passing proposals in the absence of clear evidence of an attack inevitably raises questions about whether minority interest groups are exercising excessive power.
• Rising systemic risk
Significantly reducing the liquidation ratio and raising the debt ceiling means that the system is more susceptible to chain reactions under high leverage when the market fluctuates.
• Shaken community trust
The silencing of skeptics and the lack of adequate justification for emergency measures will potentially deal a blow to MakerDAO’s reputation for decentralized governance.
Multiple motivations behind the emergency proposal
PaperImperium pointed out that some MKR holders have recently expressed dissatisfaction with MakerDAO’s development direction, profit sources, and community governance methods, and called for reforms. Whether this proposal can be related to these internal demands is still a key point worth exploring.
Internal reform demands
Against the backdrop of “sluggish growth and declining profits,” some MKR holders hope to promote protocol changes and improve capital utilization efficiency.
Governance factionalism
Different interest groups have different demands at the governance level, and using emergency proposals to quickly advance certain changes may be a means of competing for the direction of the agreement.
External defense or internal operation
The term “governance attack” is not uncommon in the DeFi circle, but its actual implementation often requires obvious on-chain evidence; the lack of conclusive evidence this time also raises concerns about the possibility of “inside manipulation.”
Future Outlook: Where is MakerDAO headed?
The impact of MakerDAOs emergency governance proposal is not limited to the parameter adjustment itself, but its more far-reaching significance lies in the questioning of the decentralized governance model. Currently, the community is particularly concerned about the following issues:
1. Improvement of governance processes
How can we ensure that subsequent major proposals follow a more transparent and democratic process, rather than bypassing community consensus in the name of “urgency”?
2. Information Disclosure and Supervision
Can a reasonable explanation be given for the disclosure of specific details of the potential attack and the explanation and handling of banned users to maintain the communitys trust in governance?
3. Balance between decentralization and efficiency
Decentralized governance is often less efficient, but an overly centralized decision-making model may lead to abuse of power. How to find the best balance between the two will become the core challenge of MakerDAO.
Conclusion: Beware of black boxes in governance and return to community consensus
The Emergency Governance Proposal is like a magic mirror, allowing us to see the most important aspect of the DeFi ecosystem: when external or internal pressures arise, can the governance mechanism really stand the test? As a pioneer in the DeFi field, MakerDAOs reflections on this turmoil have a warning significance for the entire industry.
Perhaps, as community critics have said, without a clear and transparent governance process and publicly verifiable evidence of attacks, any emergency may become a power tool for a few. Only by ensuring smooth community dialogue channels and establishing a sound governance mechanism can MakerDAO truly move towards a healthy and sustainable development path.
