MakerDAO Loans Can Be Gamed to Hold Out Funds From Liquidation, Startup Finds

MakerDAO Loans Can Be Gamed to Hold Out Funds From Liquidation, Startup Finds


Borrowers can close debt positions on lending platform MakerDAO under the 150% collateral minimum with this one simple trick.

A loophole in MakerDAO’s collateralized debt positions (CDPs) market, discovered by Israel-based startup B.Protocol, enables CDPs to be closed far more leniently than the system intends due to a small oversight in the auction market, according to a blog shared early with CoinDesk.

The lending protocol is meant to close positions automatically after collateral backing outstanding dai (DAI) falls below the 150% ratio. But a simple call function provides a workaround while decreasing the chance of being smacked by a liquidation penalty around that value.

By splitting CDPs into tiny positions around $100, B.Protocol analysis shows that Keepers – who bid on liquidated assets from undercollateralized positions – won’t liquidate positions because of the difficulties in calculating the profit margin, B.Protocol CEO Yaron Velner said in a phone interview. 

A position – big or small

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