TL;DR
- MakerDAO, the organization behind the stablecoin DAI, has implemented emergency fee increases in response to unprecedented market volatility and a significant reduction in reserves. The aim is to maintain the stability of DAI’s peg to the US dollar despite a decrease in its supply and heightened market activity.
- The ratified modifications include a rise in stability fees from 15% to 17.25%, an increase in the DAI Savings Rate (DSR) to 15% to encourage DAI retention, and a significant rise in the annual percentage yield (APY) for borrowing DAI via the SparkLend platform from 6.7% to 16%.
- The move by MakerDAO is a proactive measure to ensure the stability of DAI amidst market fluctuations and highlights the adaptability of decentralized finance protocols in response to market conditions.
In response to unprecedented market volatility and a significant reduction in reserves, MakerDAO, the organization behind the popular stablecoin DAI, has implemented emergency fee increases. The adjustments aim to maintain the stability of DAI’s peg to the US dollar despite a decrease in its supply and heightened market activity.
The latest Executive Vote has just been approved.
As a result, the following changes will be implemented within the Maker Protocol on March 10, 2024, at 19:55 UTC.
• Stability Fees for various collateral assets, including ETH and WBTC vaults, will… pic.twitter.com/UNUejjv8iI
— Maker (@MakerDAO) March 8, 2024
BA Labs, a key member of the MakerDAO Stability Advisory Council, proposed the emergency rate adjustment within the MakerDAO community forum. The proposal highlighted a rapid decline in DAI’s supply from $5 billion to $4.4 billion within a week.
Although DAI is supported by collateral that surpasses its value, the proposal highlights possible liquidity issues if users decide to cash out a part of the $1.1 billion in real-world assets (RWA) that the protocol presently possesses. The ratified modifications encompass a rise in stability fees, levied on DAI borrowed against collateral, from 15% to 17.25%.
MakerDAO Changes in Stability Fees and DAI Savings Rate
The DAI Savings Rate (DSR) is set to increase to 15%, a move designed to encourage DAI retention. In addition, the annual percentage yield (APY) for borrowing DAI via the SparkLend platform will see a significant rise from 6.7% to 16%. These adjustments, which came into effect on March 10, 2024, at 19:55 UTC, are planned to be provisional. Nevertheless, the procedure to revert the fees to their initial rates is not automated.
Members of the community have shown their consensus by responding to the forum post and endorsing the proposed modifications. JanSky, acting as the Reserve Governance Facilitator, acknowledged the validity of the proposal and stated that the team was: “working on implementing these recommendations and will provide updates as soon as they are available”.
The Accelerated Proposal also received approval for an executive vote from the Stability Facilitator Ecosystem Team. The fundamentals backing DAI remain solid, and this accelerated governance proposal is crafted to avoid potential short-term liquidity crunches.
This move by MakerDAO is a proactive measure to ensure the stability of DAI amidst market fluctuations and highlights the adaptability of decentralized finance protocols in response to market conditions.
