The March 2020 crash cleared Maker auctions at zero Dai

Inherited archive entry · retained from the earlier edition. Its factual, legal and policy claims have not all been reverified for 19 September 2026. Research scope.

What the postmortem records about 12-13 March 2020

MakerDAO's own account of the event describes a roughly 36-hour window beginning 12 March 2020 in which crypto markets fell by more than half, and the market-collapse postmortem says transactional activity on Ethereum "exploded," causing network congestion and a spike in gas prices. Price oracles "functioned appropriately," the postmortem states, but were delayed by the same congestion affecting everyone else. The falling collateral value triggered auctions on roughly 1,200 Vaults; keepers lacked the Dai or the capacity to contest all 4,447 auctions that resulted, and a number of bidders won collateral for bids the postmortem describes as "decimal points above zero."

A mechanism working as specified, and what that still cost

Liquidation itself was not a malfunction. The whitepaper describes exactly this automatic collateral auction as the safety valve for an undercollateralised position. What failed was an assumption underneath it: that gas prices and confirmation times stay low enough for a competing bidder to challenge a lowball bid inside the auction's window. When congestion made that impractical, auctions cleared at whatever price was offered. The postmortem puts the resulting shortfall at roughly 5.4 million Dai, which the protocol covered exactly as the whitepaper's design specifies for undercapitalisation, by diluting and selling MKR. By 29 March, 20,980 MKR had been auctioned for 5.3 million Dai to recapitalise the system.

What governance changed afterward

The postmortem records two immediate responses: adjusting auction parameters to better fit Ethereum's real operating capacity, and adding USDC as a collateral type to reduce reliance on assets that move together with the rest of the crypto market during a crash. The protocol's current documentation, retrieved 16 September 2026 under its 2024 Sky Protocol rebrand, still describes a multi-asset collateral pool and an auction-based liquidation process, which suggests the diversification lesson was built into the architecture rather than treated as a one-off patch.

Questions to carry forward

• Did the stated one-hour window to add collateral or repay debt assume a network condition that was already unrealistic before 12 March?
• Who bears a shortfall when an auction clears below the collateral's real value: the borrower, the MKR holder, or both?
• Does a protocol's post-crisis diversification hold up the next time correlated assets fall together?

Black Thursday is often summarised as an oracle failure or an attack. MakerDAO's own record supports neither framing cleanly: oracles worked, and the postmortem itself says there is insufficient evidence to call the zero bids an attack. The more precise finding is narrower and more useful: a mechanism specified correctly on paper can still fail its users when the network it depends on is congested exactly when it matters most.