MakerDAO Holders Voting To Increase DAI Stability Fees From 7.5 To 11.5 Percent
Holders of MakerDAO (MKR) tokens are voting on a fifth increase in the “stability fee” placed on the programmatic lending protocol’s DAI stablecoin.
Over the week, the MakerDAO community considered up to five different options related to the fee on DAI, with the highest proposal putting forth a 4 percent increase.
On Thursday, April 11, MKR holders signaled support for hiking the fee by the highest proposed percentage during a governance call, a scenario that is likely to see it jump from the current 7.5 percent to 11.5 percent.
After that preliminary round, the Maker Foundation Interim Risk Team announced an Executive Vote in which the community is currently voting in a bid to ratify the new stability fee.
Once the community ratifies the 11.5 percent fee, acquiring programmatic DAI loans will become a bit more expensive.
However, the main aim of the high fee is to decrease DAI supply and thus push its value up towards its $1 peg. Currently, that value continues to hover close to $0.96.
According to the Risk team’s lead member Cyrus Younessi, “the DAI peg [is] weak” and supply began to rise as ether prices experienced a surge this past week. But the result is “lots of borrowing” that has weakened the DAI price further.
Apart from that, the increase is also due to the fact that there has been a very “little attributable impact” on the price occasioned by the previous hikes on the DAI Stability Fee, the risk team wrote in a blog post.
Last month, MKR holders voted to increase the fee by 4 percent, raising it to 7.5 percent. That followed another three smaller increases ratified since February.
A different approach to DAI supply!
As the previous attempts to hold the dollar peg via stability fee increases have somehow proved futile, a number of users have floated various suggestions aimed at reducing the DAI in the market.
One such view came from the founder of digital asset investment firm MythosCapital, Ryan Sean Adams. Commenting on Reddit, Adams said that it might soon be sensible “to lay off the [DAI stability fee] hikes and rely on the 100 million supply cap to restore order.”
The same point was discussed during Friday’s MakerDAO governance call. Mathew Light reportedly noted that if the DAI price fails to “improve” over the coming week, then the community should agree to reduce the debt ceiling alongside efforts to raise the stability fee.
At the moment, the only collateral is ETH and users can lock up their ETH in exchange for loans amounting to a maximum of 100 million DAI (the debt ceiling).
One proposal is to have multi-collateral DAI, allowing users to lock up different cryptocurrencies for the loans, with every other collateral having its own “debt ceiling.”
But that proposal didn’t sit well with Younessi, who noted that “messing with the DAI ceiling” to influence its price did not seem to be “the right approach.”
Younessi’s view found support from Lawson Baker, a call participant who felt that instead of tampering with the debt ceiling, the DAI would benefit from an aggressive and dynamic approach to the question of stability fee increases.
Baker compared relying on the DAI supply cap or introducing new debt ceilings to “shutting down” an app from being accessed by new users.
Calling it a “bad idea,” he wrote in the chatroom:
“Increase the costs until demand slows enough to stabilize the system.”
Richard Brown, community development head at MakerDAO Foundation, has said that the community will move ahead with plans for “continuous polling,” until they reach a point where they decide that the fee hikes have become a little “onerous and unnecessary.”
But Brown noted that the move will only succeed if MKR holders turned out to vote every time there was a need to signal support for the changes.
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