The crypto risk assessment company Gauntlet proposed to the Aave community to deprecate the decentralized stablecoin Mai (MIMATIC) on the lending protocol.
This is due to the ongoing depeg regarding the stablecoin. The price of Mai has seen a significant decline in recent weeks, falling from $0.88 in early October to 0.72 earlier today. According to CoinGecko, it is currently trading at $0.78 facts.
In response, Gauntlet advised Aave’s administrative unit to initiate the depreciation process for Mai across all EVM chains by lowering lending terms and increasing lending rates.
The proposal declared“Given the price drop of MAI to ~$0.72 in the last 24 hours and its inability to regain traction over the past few months, Gauntlet recommends initiating the deprecation of MAI. We aim to do this by lowering LT and raising interest rates to encourage repayment.”
The Mai stablecoin, issued via the DeFi protocol Mai.Finance and managed by QiDAO, has experienced difficulty recovering its target dollar peg since July, when it fell below $0.98 for the first time.
The project has not provided clarity on why the stablecoin has been trading below the dollar line for months. Mai’s fully diluted market cap is worth $238 million, with the majority of the offering issued on the Polygon blockchain.
The price of Mai has fallen significantly below its steady value in recent days. Source: Coin gecko
Risks associated with decentralized stablecoins
Coinciding with the Mai stablecoin issuance, Real USD (USDR), which claims to be backed by tokenized real estate assets and is issued by TangibleDAO, also experienced a major depeg event earlier this week. This led to a 50% price drop, and the stablecoin is still struggling to recover and is currently trading at $0.53.
Unlike centralized stablecoins like USDC and USD Tether (USDT), which are backed by real-world cash or cash equivalents, decentralized stablecoins are backed by cryptocurrencies and often operate based on algorithmic mechanisms.
Consequently, they are more susceptible to losing their linkage due to fluctuations in market conditions or the underlying assets. Previous examples of this include depegs affecting USDX on the Kava blockchain and USDN on waves.
A QiDAO spokesperson did not immediately respond to a request for comment.
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