MakerDAO Approves Emergency Fee Hikes in Response to DAI Stability Concerns

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Hongji Feng

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Hongji Feng

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Hongji is a crypto and tech reporter. He graduated from Northwestern University's Medill School of Journalism with a Bachelor's and a Master's. He has previously interned at HTX (Huobi Global),...

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March 11, 2024 02:32 EDT

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Facing unprecedented market volatility and a significant reduction in reserves, BA Labs has proposed an emergency rate adjustment within the MakerDAO community forum.

In an effort to address the immediate challenges posed by the current market conditions, BA Labs, a key member of the MakerDAO Stability Advisory Council, submitted a comprehensive proposal on March 9 to increase various fees related to the DAI stablecoin.

The latest Executive Vote has just been approved.

→ https://t.co/oIY1JBtLuq

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

Proposed MakerDAO Rate System Adjustment

“Given the current market conditions, BA-Labs is proposing protocol parameter changes as part of a predefined accelerated governance process in the language of the Atlas,” said BA Labs.

The proposal by BA Labs included a significant increase in the DAI Savings Rate (DSR) from 5% to 15%, along with targeted stability fee raises for key vault types such as ETH-A, from 6.41% to 15.25%, and WBTC-A, from 6.68% to 16.75%.

“The DSR is an additional lever MakerDAO can utilize the DSR to make holding DAI more attractive, which in turn increases DAI demand, and ultimately alleviates the downward pressure of the DAI price,” said BA Labs.

Additionally, the post suggested reducing the Governance Security Module (GSM) Delay from 48 to 16 hours and adjusting the Peg Stability Module (PSM)-USDC-A DC-IAM ttl from 24 to 12 hours, streamlining governance and enhancing DAI’s stability framework.

“The fundamentals backing DAI remain solid, and this accelerated governance proposal is crafted in order to avoid potential short-term liquidity crunches,” stated BA Labs.

In the past week, the total supply of DAI has decreased from about 5 billion to 4.38 billion. This reduction was primarily attributed to volatile crypto market conditions, with increasing rates, and users creating and then selling DAI in exchange for different assets.

Community Shares Positive Responses

Community members have demonstrated agreement responding to the forum post, supporting listed changes.

As the Reserve Governance Facilitator, JanSky recognized the legitimacy of the proposal and said that the team were “working on implementing these recommendations and will provide updates as soon as they are available.”

The Stability Facilitator Ecosystem Team also approved the Accelerated Proposal for an executive vote.

Some other community contributors, including GFX Labs, seconded the purpose and direction of the proposal but rebutted the DSR increase, urging more gradual changes.