OlympusDAO launches Lending AMO, Platypus’ USDP gets exploited, How MakerDAO mints DAI,...
Issue #29 of The State of DeFi Lending newsletter
Welcome to issue #29 of The State of DeFi Lending, a newsletter covering the highlights of lending markets in DeFi.
In this issue we cover
OlympusDAO is launching a Lending AMO and opens OHM borrow markets on Euler & Silo
Platypus stablecoin USDP gets exploited for $8.5m, yet parts of the stolen funds are recovered with the help of BlockSec, ZachXBT and the Aave community.
MakerDAO generates DAI in three different ways: Vaults, D3M, PSM. If this sounds cryptic, read below to understand the different mechanisms.
Read below for more…
News
OlympusDAO is launching a Lending AMO and $OHM borrowing markets are enabled on Euler and Silo.
The Lending AMO (short for Algorithmic Market Operations Controller) is an enhanced feature and OlympusDAO will deposit a maximum of Ω200k (~$2m) into these lending markets.
The purpose of the AMO is to keep OHM borrow rates more attractive, scale OHM supply more strategically and optimize utility, further diversify the OHM backing. OHM that’s minted on Euler or Silo will be minted against this new collateral aka “claim on collateral”. OHM will thus consist of PCV-backed OHM vs Collateral-backed OHM.
The Lending AMO is turning into a high-priority item for OlympusDAO team as they want to expand the AMO into new markets and develop specific smart contracts.
CryptoTwitter is quick at identifying yield-farming strategies that utilize the Lending AMO.
Platypus’ stablecoin USDP depegged on Thursday last week as the underlying protocol suffered a flashloan exploit to the tune of $8.5m.
However, in a fortunate turn of events and with help from BlockSec, Platypus has been able to recover a portion of the funds (c. USDC 2.4m).
The attacker could only cash out $270,000 out of the almost $9.1 million in stolen funds from Platypus. As per on-chain data, approximately $8.5 million of stolen funds are frozen in the contract they were transferred to, and another $380,000 from a second attempted exploit were mistakenly sent back to Aave. Using a callback function in the attacker's contract, BlockSec helped Platypus recover a portion of the stolen funds.
Turns out that onchain sleuth ZachXBT had a significant contribution in identifying the hacker.
Platypus is now engaging with the Aave community to retrieve the $380k that are locked in the Aave contract.
MakerDAO is regularly featured in this newsletter and we came across this very interesting thread that recaps the 3 ways how MakerDAO generates DAI.
Maker Vaults: This is the best-known minting mechanism and also the one most retail users will be familiar with. Users can deposit a number of cryptocurrencies/tokens (eg ETH, WBTC, Uni v2 LP and many more) into a vault that needs to be overcollateralized. Once vaults are breaching LTV thresholds, the collateral is auctioned off to close the Vault.
Direct-Deposit Modules (D3M): This is Maker’s wholesale credit facility engine that is integrated with other lending markets such as Compound. It’s basically a DAI-minting mechanism on a third-party lending market. The Compound D3M is a Maker Vault backed by Compound DAI (cDAI) and this DAI is in return collateralized by assets on Compound (eg ETH, WBTC).
Peg-Stabilty Modules (PSM): This is Maker’s permissionless instant liquidity tool for efficient stablecoin swaps. Its function is to ensure a 1:1 peg with other, centralized USD stablecoins (USDC, GUSD, USDP).
The PSM has been a central point of recent MakerDAO activity as it has helped to generate substantial revenues: Centralized stablecoin issuers are offering revenue-share mechanisms to MakerDAO to increase the debt ceiling and attract more inflows.
In this context, a recent proposal by Paxos to increase the USDP debt ceiling has stalled given the recent regulatory actions brought forward by the NYDFS and SEC regarding BUSD.