Ethereum co-founder Vitalik Buterin has criticized the MakerDAO platform’s idea of ​​rebalancing the DAI stablecoin collateral, which involves selling $3.5 billion worth of USDC for ETH.

The purpose of the DeFi platform was announced by developer yEarn Finance under the alias banteg. According to him, the DAI regulator is considering buying ether “on the market” by converting all USDC from the Stability Module (PSM).

MakerDAO is considering buying a $3.5 billion ETH by converting all USDC from stable stability module to ETH.

– banteg (@bantg) 11 August 2022

Previously, as part of sanctions restrictions, Circle had blacklisted the USDC addresses of 38 Tornado Cash wallets. One of the stablecoin operators blocked the movement of at least 75,000 USDC.

Amid these developments, DeFi project MakerDAO began developing a plan if the protocol’s core smart contracts fell under government sanctions, according to The Defiant. The publication noted that plans to reduce dependency on USDC are also being considered in other DeFi projects.

The screenshot below shows the DAI provisioning structure.

In response to Banteg’s tweet, Vitalik Buterin called MakerDAO’s intentions a terrible idea.

Errr this seems like a risky and terrible idea. If ETH drops too low, the collateral value drops a lot, but the CDPs are not liquidated, so the entire system risks becoming a fractional reserve.

— vitalik.eth (@VitalikButerin) 11 August 2022

“If Ethereum crashes in price, the value of the collateral will drop a lot, but CDP they are not eliminated. Therefore, the entire system is in danger of becoming a partial backup,” said the co-founder of Ethereum.

According to him, there are no collateral types other than Ethereum. should not exceed 20% of the total.

MakerDAO tops DeFi Llama’s ranking with $9.06 billion TVL.

Previously, Tornado Cash user accounts were blocked by the decentralized derivatives exchange dYdX.

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