MakerDAO Community to Set Up Circuit Breaker Mechanism to Improve Emergency Response
On March 13, the MakerDAO community has launched a new proposal to set up a “circuit breaker mechanism” that can quickly disable the PSM module in an emergency without waiting for governance delay.
MakerDAO’s new proposal: It is recommended to set a “fusing mechanism” to disable the PSM module immediately in case of emergency
Analysis based on this information:
The MakerDAO community made a significant announcement on March 13th by proposing to establish a circuit breaker mechanism that could disable the primary supply module(PSM) in a time of emergency without waiting for governance approval. The PSM module is a critical element that maintains the stability of the MakerDAO ecosystem by keeping the DAI stable coin pegged to the value of the US dollar. The MakerDAO team has made this proposal to improve the efficiency of the emergency response system and enable quick resolutions in times of crisis.
The circuit breaker mechanism consists of a smart contract that will be designed to suspend or close the PSM module in response to a crisis. It is an important development that will provide the MakerDAO community with an efficient mechanism to counter any unexpected crisis without having to seek approval from the governance system. The governance delay can slow down the decision-making process and delay the response time, which can lead to significant losses.
The proposal follows a few recent events where the MakerDAO system faced critical challenges that put the stability of the system at risk. The most significant event occurred in March 2020 when the value of ETH crashed significantly due to the COVID-19 pandemic. The sudden fluctuation caused a liquidity crisis, and the stability of the DAI currency was compromised. It was during this period that the governance approval process proved to be inefficient, leading to delayed decision-making and a slow response.
In summary, the circuit breaker mechanism proposed by MakerDAO will significantly improve the emergency response system’s efficiency and minimize downtime in cases of crisis. The MakerDAO community continues to work tirelessly to improve the MakerDAO system’s stability and ensure the DAI currency’s steady value while maintaining the integrity of the ecosystem.
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