MakerDao Yet Again Voting to Raise the Dai Stability Fee to 7.5%, Up from 4%

The third time is usually the charm but for DAI, it ain’t so!

The Maker Foundation is having another stability fee hike which is the fourth time. The proposal as per the official governance call is to

“Raise the Stability Fee by 4% to 7.5% per year.”

Discussed in the governance call on Thursday, March 14th, the key factors behind this call has been the exchange price of DAI persisting below $1 and the recent increase in the stability fee having

“little attributable impact.”

Just last month, the stability fee was increased twice, each time an increase of 0.5 percent. However, it failed to have any effect which according to the Maker Foundation indicates that “neither the target Stability Fee nor the incremental change was appropriate,” hence, another raise.

MakerDAO community has agreed to move forward with this additional stability fee increase that has three increment proposals i.e. 0%, 2%, and 4%.

Thin Opportunistic Volumes Throwing Dai off its Peg

“What’s been happening is that there’s been a lot more demand to borrow Dai recently than to hold Dai,”

told MakerDAO CEO, Rune Christensen to BreakerMag.

From the start of the year, the increment in DAI’s stability fee has seen a significant increase of 350 percent, which is currently standing at 3.5 percent. According to the latest edition of Diar research, the hit that threw Dai off its peg comes from a “short window of opportunity” to buy Dai at a discounted price.

“A 6% discount of Dai on Stablewire, a platform that allows the interchanging of various stablecoins, resulted in the token being traded well below peg with thin trading volume.”

Three Options For Voters

According to the governance call, the proposal is also to vote for no change that is leaving the stability fee at 3.5 percent which came from a slight uptrend in Dai price to $0.985 from $0.96. However, this increase in price has been on low volume, so it is yet to be seen if the increase in stability fee from last week will be maintained.

“A ‘wait and see’ approach could allow more time for users to continue wiping down their CDPs and/or speculators to push the Dai price up.”

The other two options available are a 2% increase and a 4% raise. To give a stronger incentive to the market participants to buy Dai at $1, a 2% increase has been proposed that will keep them

“steady cadence going.”

However, unchanged market-maker inventory suggests for an even higher increase and hence 4% increase is considered that would swiftly close the gap. This would be the largest one-time raise that runs the risk of “overshooting” their estimate but

“the correct Stability Fee could still be 7.5% or higher.”

There are still two days left for voting and now, this coming Friday on March 22nd, there will be an Executive Vote to decide if the changes proposed is supported or rejected. In case the agreed upon increase in stability fee fails to do its trick,

“another proposal will be put forth for a subsequent increase.”

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