The Maker Foundation Interim Risk Team will place a Governance Poll proposal into the voting system to raise the Dai Stability Fee by 2.0%, for a new rate of 3.5%.

The Governance Polling will be active for 3 days beginning on Monday, March 4th at 5pm UTC, the results of which will inform an Executive Vote,which will go live on Friday, March 8th, at 5pm UTC.

Review

The increase to the Stability Fee was discussed in the Governance call on Thursday, February 28. Please review the Video, Audio, 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
• No attributable impact from the previous Stability Fee increases

Analysis

An examination of the available data strongly suggests a Stability Fee increase is warranted. The exchange price of Dai across several major exchanges, such as Coinbase Pro and Bitfinex, has been consistently hovering in the $0.975 to $0.985 range for 1-2 months. Decentralized exchanges with sufficient volume/liquidity, such as Eth2Dai, also confirm the same discrepancy.

Below is an average price chart of the Dai trade history.

Informal discussions with several large Dai market makers have suggested that inventory levels have run high, and balance sheet capacity has diminished. Informal polling through various community channels has also shown strong support for an increase.

Incentivizing CDP closures through a Stability Fee increase (thereby reducing outstanding Dai) is strongly viewed as the appropriate action.

Proposed Change

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.

Accordingly, the internal Risk Team suggests that the incremental step size for this and future proposals be increased by 2% until the trend in the peg has been corrected.

Next Steps

• On Monday, March 4th there will be a Governance Poll asking MKR token holders if they support or reject a Stability Fee increase of 2%. The poll will last until March 7th 4pm UTC.
• If an increase to 3.5% is insufficient as measured over the following 7 days, another proposal will be put forth for a subsequent 2% 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.