MakerDAO Initiates Temporary Fee Adjustments Amid Market Volatility to Bolster Dai Stablecoin
Summary:
MakerDAO, the entity behind the MKR token, has passed an executive vote introducing temporary fee adjustments aimed at maintaining protocol stability amid market volatility. Prompted by a significant decrease in Dai supply from $5 billion to $4.4 billion, the proposal includes measures such as changes to Maker Vaults, adjustments to borrowing rates, and alterations to the Real-World Asset (RWA) protocol. These changes are intended to bolster the system's resilience, despite potential liquidity issues posed by RWA vehicles as collateral. The changes will take effect from March 10, 2024. Despite being temporary, concerns have been raised about the impact and extent of these adjustments.
The entity behind the MKR token, MakerDAO, has instigated an Executive Vote resulting in provisional fee alterations to fortify its protocol amidst market fluctuations and bullish sentiment, which has led to a decline in reserves for the Dai stablecoin (DAI). This move came as a counter to an accelerated drop in Dai availability, which decreased from $5 billion to $4.4 billion within a week, as highlighted in BA Labs' proposal, a constituent of Maker's Stability Advisory Council.
MakerDAO, in its resolution, plans to fast-track the approval procedure for a stability action related to its stablecoin if users decide to reclaim some of the $1.1 billion Real-World Assets (RWA) present on the protocol. Notwithstanding Dai's overcollateralization, using RWA vehicles as collateral could lead to potential liquidity complications if prospects of selling Dai persist.
MakerDAO's ecosystem presently stands stable; however, it acknowledges the value of preparing for erratic user behaviour. The proposed alterations encompass variations to Maker Vaults, the DAI Borrow Rate from SparkLend, the PSM (Price Stability Module), the Dai Savings Rate (DSR), and the Governance Security Module (GSM) Pause Delay.
Additionally, the proposal recommends elevating the stability fees for various collateral assets recorded on the platform from 15% to 17.25%. MakerDAO also intends to augment the SparkLend DAI Borrow APY from the existing 6.7 % to 16%. The set of approved adjustments will come into effect on March 10th, 2024, at 19:55 UTC, a day from now.
They plan to adjust PSM to introduce a cooling-off period for Debt Ceiling hikes which would be scaled back from 24 to 12 hours. Among other measures to be executed are the increase in Dai Savings Rate to 15% and the GSM Pause Delay from 48 hours to 16 hours for a quicker enactment of future adjustments.
While these modifications are meant to be provisional, there is no automatic mechanism for their retraction. GFX Labs, a firm involved in blockchain research and development, expressed apprehension on the discussion page regarding the extent of the changes, despite favoring their strategic direction. They feared the potential market dislocations and disruptions that may arise from them.
Published At
3/10/2024 11:02:26 AM
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