MakerDAO, the entity overseeing the MKR token’s evolution, has greenlit an “Executive Vote” to enact provisional fee alterations aimed at fortifying the protocol in response to escalated market volatility and bullish sentiment, which have led to a decline in reserves for its DAI stablecoin.
The proposal arises following a swift reduction in Dai supply from $5 billion to $4.4 billion over the past week, as detailed in the initiative put forth by BA Labs, a member of Maker’s Stability Advisory Council.
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
In the proposal, MakerDAO aims to streamline the approval process for a stablecoin stability measure in case users opt to redeem a portion of the $1.1 billion in real-world assets (RWA) available within the protocol. Despite Dai’s overcollateralization, the utilization of RWA assets as collateral presents potential liquidity challenges in the event of continued Dai sell-offs.
The proposal states:
“Liquid stablecoin reserves and reserves deployed to RWAs are more than sufficient to sustain the increasing pressure generated by the potential bullish market sentiment. The issue lies in the liquidity crunch inherent in the exposure toward stablecoins deployed through RWAs.”
Although MakerDAO’s ecosystem presently maintains stability, it finds it prudent to prepare for potentially unforeseeable user actions. The proposed measures encompass alterations to Maker Vaults, the SparkLend DAI Borrow Rate, the Peg Stability Module (PSM), the Dai Savings Rate, and the Governance Security Module (GSM) Pause Delay.
The modifications entail raising stability fees on various collateral assets listed on the platform from 15% to 17.25%. Furthermore, it aims to elevate the SparkLend DAI Borrow annual percentage yield from the current 6.7% to 16%. The array of changes received approval for implementation effective from March 10 at 7:55 pm UTC.
MakerDAO also intends to tweak the PSM to incorporate a cooldown period for debt ceiling increases, reducing it from 24 to 12 hours. Additionally, other measures set to be enacted include boosting the Dai Savings Rate to 15% and reducing the GSM Pause Delay from 48 hours to 16 hours to expedite the implementation of future adjustments.
While these adjustments are provisional, there is no automated mechanism for reverting the fees. GFX Labs, a blockchain research and development firm, expressed its views on the proposal’s discussion forum, acknowledging the positive direction of the changes but voicing concerns about their magnitude, apprehensive of potential market dislocations and disturbances.
