Empirical Evaluation of MakerDAO's Resilience

Stablecoins are cryptocurrencies with the aim to reduce the price volatility by design. This increases their acceptance as an instrument of payment. Centralized approaches facilitate stable organizational structures, at the cost of introducing dependencies. Decentralized projects, on the other hand, face several challenges, one of them at the core of stablecoins: stability. In this paper, we assess the stability of the MakerDAO protocol, one of the major decentralized stablecoins. We conduct a measurement study regarding MakerDAO's resilience during the first year of its full protocol, from November 2019 to 2020, including the cryptocurrency crisis in March 2020. Our analysis is based on the publicly available transaction data of Ethereum that documents the activities of MakerDAO's contracts executing the protocol. We state requirements for resilience and introduce empirical metrics, based on which we test the resilience hypotheses against the transaction data. While the events of March 2020 were unfortunate for several users, the resilience at protocol level proved to be good even under stress.