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