The Maker Foundation Interim Risk Team will place three Governance Poll proposals into the voting system to raise the Dai Stability Fee by 0%, 2%, and 4%.

The Governance Polling (FAQ) will be active for 3 days beginning on Monday, March 18th at 6pm UTC, the results of which will inform an Executive Vote (FAQ) which will go live on Friday, March 22th, at 5pm UTC.

Review

The increase to the Stability Fee was discussed in the Governance call on Thursday, March 14th. Please review the Video, Audio, Transcript and the online discussion to inform your position prior to voting.

Key factors under consideration for increasing the Stability Fee are:

• Exchange price persists below $1
• High inventory levels among market makers and prop desks
• Little attributable impact from the previous Stability Fee increases

Analysis

In February, the Stability Fee was increased twice, each time by 0.5%. The impact of this combined 1% increase was negligible, indicating that neither the target Stability Fee nor the incremental change was appropriate.

Based on last week’s governance call, the MakerDAO community is moving forward with a Governance Poll to gauge sentiment for an additional Stability Fee increase. The Interim Foundation Risk Team has put together a summary of the different choices:

No change: Leave the Stability Fee at 3.5%.

The argument for no change is due primarily to the slight uptrend in the Dai price from $0.96 to $0.985. Because this increase has occurred on low volume, it is difficult to determine whether or not the effect of last week’s Stability Fee increase has finished running its course. 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.

2% increase: Increase the Stability Fee to 5.5%

The absence of any significant volume clearing near $1 indicates that there needs to be stronger incentives in place. A 2% increase would keep the steady cadence going and push market participants one step closer towards purchasing Dai at $1. Unchanged market maker inventories suggest that there is still more increases needed in the Stability Fee before supply/demand equilibrium is reached. A 2% increase would be in accordance with previous increments used.

4% increase: Increase the Stability Fee to 7.5%

A larger increase could also be considered given the perceived differential before CDP users are incentivized to start aggressively closing CDPs. Depending on the potential short term risks to a misaligned peg, a 4% increase could be warranted to swiftly close the gap. This would be the largest one-time raise, and runs the risk of overshooting our estimate. Of course, the correct Stability Fee could still be 7.5% or higher.

Next Steps

• On Friday, March 22nd there will be an Executive Vote asking MKR token holders if they support or reject the change proposed by this Governance Poll.
• If the results of that Executive Vote is insufficient to manage inventory levels as measured over the following 5 days, another proposal will be put forth for a subsequent increase.

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Resources

Additional information about the Governance process can be found in the Governance Risk Framework: Governing MakerDAO

Demos, help and instructional material for the Governance Dashboard can be found at Awesome MakerDAO.

To participate in future Governance calls, please join us every Thursday at 17:00 UTC.

To add current and upcoming votes to your calendar please see the MakerDAO Public Events Calendar.