The Maker Foundation Interim Risk Team will place an Executive Vote proposal into the voting system to enact a new Dai Stability Fee of 3.5%.

The Executive Vote will be begin on Friday, March 8th at 4pm UTC and will continue until the number of votes surpass the previous Executive Vote total. This will be a continuous approval vote.

Review

The increase to the Stability Fee was discussed in the Governance call on Thursday, February 28. 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
• 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

• 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.