Gauntlet proposes deprecating Mai on Aave as stablecoin depegs to $0.72

Quick Take

  • Gauntlet proposed that Aave should begin deprecating the Mai stablecoin from lending services due to a large depeg.
  • The value of the decentralized stablecoin dropped to $0.72 earlier today before recovering slightly.

The crypto risk assessment firm Gauntlet proposed to the Aave community that it should deprecate the decentralized stablecoin Mai (MIMATIC) on the lending protocol.

This is due to the ongoing depeg involving the stablecoin. The price of Mai experienced a significant decline in the past couple of weeks, dropping from $0.88 at the beginning of October to 0.72 earlier today. It's currently trading at $0.78, according to CoinGecko data.

In response, Gauntlet recommended to Aave’s governance unit that they initiate the deprecation process for Mai across EVM chains by reducing loan terms and increasing borrowing rates. 

The proposal stated, “Given MAI price drop to ~$0.72 over the past 24 hours and its inability to regain peg for the past few months, Gauntlet recommends beginning the deprecation of MAI. We aim to do so by reducing LT and increasing borrow rates to incentivize repayment.”

The Mai stablecoin, issued via DeFi protocol Mai.Finance and governed by QiDAO, has encountered challenges in re-establishing its intended dollar peg since July when it first fell below $0.98. 

The project has not provided clarity on why the stablecoin has been trading below the dollar mark for months. The fully diluted market cap of Mai is worth $238 million, with the majority of the supply is issued on the Polygon blockchain.

Mai's price has fallen significantly below its peg over the last few days. Source: CoinGecko


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Risks associated with decentralized stablecoins

Coinciding with the Mai stablecoin issue, Real USD (USDR), which purports to be backed by tokenized real estate assets and is issued by TangibleDAO, also underwent a significant depeg event earlier this week. This led to a 50% drop in its price, and the stablecoin is still struggling to recover, currently trading at $0.53.

Unlike centralized stablecoins like USDC and USD Tether (USDT), which are backed by real-world cash or cash equivalents, decentralized stablecoins are collateralized by cryptocurrencies and often operate based on algorithmic mechanisms.

Consequently, they are more susceptible to losing their peg because of fluctuations in market conditions or underlying assets. Past instances of this include depegs affecting USDX on the Kava blockchain and USDN on Waves.

A QiDAO spokesperson did not immediately respond to a request for comment.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Vishal Chawla is The Block’s crypto ecosystems editor and has spent over six years covering tech protocols, cybersecurity, artificial intelligence and cloud computing. Vishal likes to delve deep into blockchain intricacies to ensure readers are well-informed about the continuously evolving crypto landscape. He is also a staunch advocate for rigorous security practices in the space. Before joining The Block, Vishal held positions at IDG ComputerWorld, CIO, and Crypto Briefing. He can be reached on Twitter at @vishal4c and via email at [email protected]


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