---
# System prepended metadata

title: 'ICOE: Market Event'
tags: [Emergency Resources]

---

---
tags: Emergency Resources
---

# ICOE: Market Event

## Definitions

1. Severe market downturn causes many Vaults to be liquidated, since Liquidations are limited this creates a price risk for the protocol.

1.1 Severe market downturn causes liquidation of a large Vault, since Liquidations are limited this creates a price risk for the protocol.

2. Dai peg breaks up severely.

3. Dai peg breaks down severely.

4. Major Dai liquidity source is compromised, hacked, broken.

4.1 Curve not usable; another market will take over, also PSM protects peg; keepers might be impacted here if the main liquidity venue gets compromised.

4.2 stolen Dai; actor dumps it for PSM, ETH, or BTC.

5. Major Collateral Type's liquidity source is compromised, hacked, broken
- flashloan collat, sent to uni, convert to Dai, repay loan, get collat, return part.
- flashloan dai, bid, get collat, convert collat to uni, repay flashloan

6. Inability to flashloan + market crash is bad; used for auctions + unwinding.

7. Congested Network prevents users from acting on their positions.

8. Something goes wrong with USDC; turns out to be unbacked, blacklist, regulatory risk. (what's the plan if they announce freeze)

9. Big Dai price mismatch between Networks?
If too much liq moves to L2 this creates a problem, but because of PSM Dai should be fine. Other Dai markets will lag, but this is not a huge issue for Maker. This is just a bad user experience. the main problem is the Vault side, if they are unable to unwind.

10. Integrator Risk

11. D3M failure; 

12. stETH/Lido/ETH2.0

13. Couterparty risk
LINK Oracle failure; indirectly will impact Dai & ecosystem asset prices.


### Incident Response

Covered in the [Emergency Playbook](https://docs.google.com/document/d/1PkCZo4ieq7phGVcR9j60O2Zx3yK7HYGAIkEGJ7VDQ_o/edit?usp=sharing)

#### Mitigation Tools

- Emergency defcon spells
	- Circuit breaker to disable auctions (not under delay)
	- Oracle freeze (not under delay)
- Manage a treasury that can unlock or manage emergency use funds.
- Direct market participants to liquidation tools where they can help (unified-auctions.makerdao.com/ and the [auction-demo-keeper](https://github.com/makerdao/auction-demo-keeper))
- Direct those with investable capital to where they can help ([the liquidation portal](unified-auctions.makerdao.com), and the [auction-demo-keeper](https://github.com/makerdao/auction-demo-keeper).
- Make auctions longer
- Increase `hole`
- Lower GSM delay for better short term responsiveness.
- [Flaps](https://docs.makerdao.com/smart-contract-modules/system-stabilizer-module/flap-detailed-documentation) -- Good news, surplus buffer (SB) is filling up
    - CU facilitators should draw down their budgets against the surplus buffer to prevent excessive flaps.
    - If the SB is under a lerp, we should call the lerp.

### Questions

Q: Why temporarily disable auctions?
A: If you believe that this is short term volatility event, it might be worth delaying auctions a bit. Same reason traditional world uses it.

## Resources


[Risk Dashboard - Vaults at Risk](https://maker.blockanalitica.com/vaults/at-risk/)
[Risk Dashboard - Auctions](https://maker.blockanalitica.com/auctions/)
[Protocol Vaults Tracker](https://beta.mcdstate.info/)
[Auctions Portal](https://unified-auctions.makerdao.com/)
[Liquidation Info Alternative](https://defiexplore.com/liquidations)
[Liquidation Info @ Makerburn](https://makerburn.com/#/liquidations)
[Vault Info Alternative](https://daistats.com/#/collateral)

## Templates

### Initial Emergency Notification Thread

```
Title: [Notification and Updates] A Serious Market Event is Happening (Add Detail)

Body:

In this thread we lay out all the details of the situation, what to expect, updates, and other resources related to the situation. This thread will remain locked except for mandated actors who will be posting periodic updates. Please visit [this thread_link]() for public discussion.

## Type of Emergency

*Market Event*
Inset approriate explanation

## Summary of the Situation

Severity level is *LOW/MED/HI*

From our understanding, at 00:00 UTC on Mon <something happened>.

## Affected Stakeholders

1. Vault Users
2. Auction Participants
3. Others as fitting

## Current Issues

1. depends on the situation, insert as needed

## What to expect

We will be updating this thread with information as it comes. Additionally, a post-mortem report on the incident will be created.

## Team Updates

### Team

Insert text for update

## Market Event Resources

[Risk Dashboard - Vaults at Risk](https://maker.blockanalitica.com/vaults/at-risk/)
[Risk Dashboard - Auctions](https://maker.blockanalitica.com/auctions/)
[Protocol Vaults Tracker](https://beta.mcdstate.info/)
[Auctions Portal](https://unified-auctions.makerdao.com/)
[Liquidation Info Alternative](https://defiexplore.com/liquidations)
[Liquidation Info @ Makerburn](https://makerburn.com/#/liquidations)
[Vault Info Alternative](https://daistats.com/#/collateral)

```

### Discussion Thread

```
Title: [Discussion] A Serious Market Event is Happening (Add Detail)

Body:

As covered in the [Summary & Updates thread](link), <insert info about situation>.

This thread is for public discussion, since the summary and updates thread is locked and reserved for mandated actors to post updates.

## Themes in the comments

- Mentions x
- Mentions y
- Mentions z

```

### Signal Thread for xxx(emergency specific)
```
Ominous missing template
```

### Response Summary Thread
```
Title: Summary of <Market Event>

Body:
We've created a summary of the events. This includes a timeline an overview of the incident response, and a section on Proposed Actions.

---

# Timeline of Events (replace text)

**Monday Month 00th**
The Emergency Shutdown Module reached 50,000 MKR deposited.
Emergency Shutdown Initiated.
Initial Notification and Updates thread posted.
Discussion Thread posted.
Special rocketchat channel created.

**Thursday Month 00th**
Weekly Governance and Risk Call
* Emergency Shutdown Discussed
* Redeployment Discussed

**Monday Month 00th**
etc

**Monday Month 00th**
etc

**Monday Month 00th**
etc

# Analysis of Events

## <Market Event> Response

**Successes**

* Insert
* Insert
* Insert
* Insert

**Room for Improvement**

* Insert
* Insert
* Insert

**Points of Interest**

* Insert
* Insert
* Insert

## Delay Period

**Successes**

* Insert
* Insert
* Insert
* Insert

**Room for Improvement**

* Insert
* Insert
* Insert

**Points of Interest**

* Insert
* Insert
* Insert

## First Mitigating Action

**Successes**

* Action was taken swiftly.
* Insert

**Room for Improvement**

* Insert
* Insert
* Insert

**Points of Interest**

* Insert
* Insert
* Insert

## Public Relations

**Successes**

* Insert
* Insert
* Insert

**Room for Improvement**

* Insert
* Insert
* Insert

**Points of Interest**

* Insert
* Insert
* Insert

# Analysis of On-Chain events

## xxx

# Proposed Actions

**Proposed action**

More detailed Description.

**Proposed action**

More detailed Description.

```
