Source: Blockworks.co

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MakerDAO’s Controversial Decision to Block VPN Users on Spark Protocol

MakerDAO’s decentralised finance platform, Spark Protocol, has drawn criticism for its recent decision to block users from accessing the platform via Virtual Private Networks (VPNs). The move, initially aimed at restricting U.S. residents from using the lending platform, has sparked outrage among privacy advocates worldwide, who see it as an attack on individual privacy rights. The controversy has also raised concerns about the developers’ prioritising profit over principles.

Users attempting to access Spark Protocol’s DAI lending market using VPNs have been met with an error message stating that such access is not allowed. The measure was implemented to prevent U.S.-based users from circumventing the platform’s restrictions, but it has affected VPN users globally. 

Privacy advocates, including DeFi analyst Chris Blec, argue that this move is a significant blow to the ethos of decentralization and user privacy. Blec’s criticism extends to MakerDAO’s developers, accusing them of prioritizing profits over user rights.

Spark Protocol’s efforts to screen and block addresses engaging in prohibited activities are facilitated by TRM Labs’ blockchain intelligence services. The collaboration aims to ensure compliance with legal regulations and enhance the platform’s security. While TRM Labs can view user addresses, it claims not to track or share any associated metadata, alleviating some concerns regarding data privacy.

Enhanced Dai Savings Rate Implemented Amidst Controversy

As the controversy surrounding VPN access unfolds, Spark Protocol introduces the Enhanced Dai Savings Rate (EDSR), temporarily increasing the DAI Savings Rate (DSR) to 8% during periods of low utilization. This move comes amidst a wider DeFi market downturn, with total value locked (TVL) across various protocols experiencing a 7% decline in the aftermath of Curve Finance’s exploit.

screen shot  of MakerDAO terms and conditions to emphasise how MakerDAO Sparks Controversy by Blocking VPN Users on Spark Protocol

MakerDAO Shows Resilience After Curve Finance Attack

In contrast to other DeFi protocols grappling with TVL losses, MakerDAO demonstrates resilience by recording a slight uptick in TVL following the Curve Finance hack. As users withdrew funds from vulnerable platforms like Curve and Aave, they sought refuge in MakerDAO, leading to increased deposits of wrapped staked Ether tokens (wsETH) in the protocol’s vaults. MakerDAO regains its position as the second-largest DeFi protocol by TVL, signaling renewed confidence from the DeFi community.

Despite the surge in collateral deposits and TVL growth, DAI’s supply has experienced a notable decline in the last week. A decrease in DAI circulation can be attributed to reduced demand in trading or lending markets. Additionally, MakerDAO’s revenue remains stable during the period under review, indicating steady performance in generating income.

MakerDAO’s native token, MKR, maintains a relatively stable price with a slight 1.07% decline in the past week. Trading indicators, including the Relative Strength Index (RSI) and the Money Flow Index (MFI), suggest a positive outlook for MKR’s token accumulation and trading dynamics. With MKR’s price above the middle band of the Bollinger Bands, buying pressure appears to outweigh selling pressure.

MKR/USDT on Trading View

Source: MKR/USDT on Trading View

In conclusion, MakerDAO’s Spark Protocol faces controversy for its decision to block VPN users, raising concerns about user privacy and the platform’s commitment to decentralization. Nevertheless, amid a broader DeFi downturn, MakerDAO showcases resilience by attracting increased TVL and reclaiming its position as a leading DeFi protocol. As the market evolves, the DeFi community closely watches MakerDAO’s performance and impact on the decentralised finance landscape.