MakerDAO May Lead to Market Fall Due to Ethereum Consolidation

Maker Road [MKR] claiming to be highly anticipated Ethereum [ETH] The merger did more harm than good to its network.

Maker, the builder of stablecoins – DAI – explained merge In a long thread of 22 tweets on July 5th.

Now, of course Proof of Work (PoW) to Proof of Stake (PoS) The transition was supposed to solve Ethereum’s scalability issues. However, MakerDAO claims that the forked coin could affect its system. So the question – how?

not doing enough

protocol explain The merger could lead to perpetual contract backwardation and negative funding. Additionally, MakerDAO mentioned that the launch itself could trigger selling pressure on existing chains on PoW.

Another prominent risk is the possibility of assets becoming worthless on Ethereum (sETH) that is already staked. Maker sees this as a big problem because it already runs lending protocols using the system. Additionally, it noted that lending protocols have the potential to receive higher ETH deposit rates due to increased liquidity due to the fork merger.

Other considerations include the possible bankruptcy of liquidity pool protocols and the neglect of stablecoins as Tether [USDT] Seems to be the only one who supports merging.

There is also the possibility of network downtime, as not all Ethereum-based protocols will move to PoS via the Ethereum chain. In fact, Maker noted that this could affect users and transactions. Likewise, replay attacks on DAI-fork or MKR-fork are not excluded from the options.

Maker went on to explain that E1P-155 is not enough to protect it, as it only works on PoW chains.

StarkNet can’t help?

Previously, Maker had announced that it was implementing a multi-chain strategy to facilitate faster withdrawals on StarkNet.

StarkNet is a permissionless decentralized ZK network that runs on the Ethereum Layer 2 (L2) network for scalability. However, Maker stated that it is deploying the chain to Layer 1 (L1) and L2 DAI systems.

Despite the deployment, subsequent releases may have proven StarkNet development to fail to address the underlying challenges. Interestingly, Maker doesn’t list possible problems, but doesn’t match them with suggested solutions.

Finally, Maker also noted that monitoring competing rates across ETH protocols may help address the deposit rate challenge. Additionally, a possible increase in the liquidation ratio could be a solution to a possible rise in volatility and liquidity risk.

With the ethereum merger looming, investors may see Maker’s concerns as justified. Additionally, this may inform other protocols on the ETH chain about the possible impact of the PoS transition.

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