The Black Thursday crash of the cryptocurrency markets is forcing some blockchain token networks to reassess their operations. MakerDAO, a decentralized blockchain that offers a stablecoin token pegged to the United States dollar, has been experiencing liquidity problems, and the situation has resulted in the Dai token trading at prices higher than the USD at significant risks to investors.
MakerDAO has been forced to include USD Coin, a digital currency backed by investment banking giant Goldman Sachs, as an additional asset to its basket of tokens. The purpose of adding USDC to the blockchain supporting Dai is to prevent a major financial crash within the financial network. USDC is a stablecoin that enjoys the support of actual greenback reserves managed by Goldman Sachs; this is a token with ample liquidity and transparency, thus making it ideal as a rescue measure for MakerDAO, which is currently undergoing a supply and demand conundrum.
At the most critical moment of Black Thursday, which unfolded on March 12, the value of Ethereum tokens plunged to historical lows. A flight-to-safety rush ensued, and the herd instinct somehow drove investors towards Dai. While this could be considered to be beneficial for MakerDAO, the blockchain was not ready to handle such a large influx of investors. It should be noted that the Dai basket of tokens was originally comprised of Ethereum and the Basic Attention Token, and it seems as if many investors were not aware of this.
Now that USDC sits along BAT and ETH within the Dai portfolio, the MakerDAO business team hopes that liquidity can be injected back into the token. The problem at this time is that Black Thursday has proven the risk of trying to manage stablecoins at a time of a global financial crisis exacerbated by the COVID-19 pandemic.
It remains to be seen whether adding USDC to the Dai mix will work. Cryptocurrency purists will tell you that stablecoin tokens will never work because their underlying blockchain networks can never be truly decentralized, and the current MakerDAO mess is certainly proving this point. Should ETH or BAT suffer another flash drop, the backing of USDC may not be sufficient to bail out MakerDAO.