Following a suggestion by crypto risk assessment company Gauntlet, Aave, a leading lending protocol in the DeFi space, is debating the future of the decentralized stablecoin Mai (MIMATIC). The cost of Mai, a cryptocurrency issued by the DeFi protocol QiDAO, has gradually decreased, from $0.88 in early October to its present price of $0.78. Aave's governance unit is advised by Gauntlet to begin the depreciation process by bringing the loan-to-value (LTV) ratio to 0 and raising borrowing rates to encourage repayment. This action might result in forced liquidations, which are predicted to cost about $70,000. The front end of Aave does not currently offer mai lending services, but smart contract level loans involving the stablecoin may still exist.
Depegging issues have affected decentralized stablecoins like Mai and Real USD (USDR). Decentralized stablecoins are collateralized by cryptocurrencies and frequently employ algorithmic mechanisms, in contrast to centralized stablecoins that are backed by physical assets. Due to changes in the market or problems with the underlying assets, this makes them more susceptible to depegging. The proposal from Gauntlet brings to light the growing worry about the viability and performance of such decentralized stablecoins in the DeFi space. A representative for QiDAO, Mai's issuer, has not yet given an explanation for why the stablecoin has been continuously depegging below the dollar level since July.
