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THREAD: DeFi is at risk due to ProgPOW. If you care about collateral-based systems such as Maker / Dai, Compound, dYdX, and more, please consider taking a stance on ProgPOW. My number one priority is to prevent a contentious split, not to approve / reject ProgPOW (PP). 1/10
Setup: If PP is pushed through, and there is a contentious split such that the non-PP chain carries sufficient economic weight **even temporarily**, then an enormous amount of collateral will instantly be liquidated. 2/10
For example, if the marketcap split of $ETH is 60/40, (which we saw in the case of ETH/ETC, and BTC/BCH), then a large number of Vaults and other positions will be liquidated since the average Maker collateralization ratio is currently ~300% and the threshold is 150%. 3/10
Even if PP is the winning fork, and the oracles all point to PP-ETH, and the exchanges list the no-PP version as an alt, as long as the no-PP chain chips away at least 40% of the economic value EVEN BRIEFLY, Maker et al. will see MASS liquidations across the board. 4/10
Not to mention general investor bearishness, panic, and so on will cause the spiral to get even worse. It won't matter if the PP chain wins out a few days later and reclaims 100% of the value. The damage will have already been done. 5/10
Or, if the split can be seen coming ahead of time, then DeFi protocols will have no choice but to suddenly increase the collateralization requirement (to 200%? 250%?) for the safety of the ecosystem. This will also cause some liquidations and other issues. 6/10
Some DeFi protocols currently don't want to get involved, or aren't paying attention to the risks. Unless you're sure that the losing fork will be stamped out immediately, I would reconsider. We do not have the luxury of waiting a month to see which fork wins out. 7/10
PERSONAL OPINION: The rest of the thread is my personal thoughts.
*This all hinges on the existence of an alternative client and exchange presence.
*My expectation is that if PP doesn't back down, an alternative client will pop up to maintain a credible no-PP fork. 8/10
*I think if one side should have to back down, it's the PP side, since its incumbent on them to not cause a contentious split.
*Inaction is the default in cases of contentious splits. This is crypto 101, and we have plenty of precedent for this being the right course of action.
*We can't look to the core devs for guidance on DeFi. At this stage they are discounting the likelihood of a fork even occurring.
*I think it's riskier for the Maker community to do nothing than to just pick a side and help ensure it's the winner. 10/10
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