MakerDAO split open stability fees as stablecoin needs wanes

Maker hopes to ignite demand for its DAI stablecoin through the fee reduction.

Decentralized finance disposition and stablecoin protocol MakerDAO has adjusted stability fees across a large vary of crypto assets used as collateral on the platform.

The move comes because the demand for DAI and alternative stablecoins has cooled amid the recent crypto market retracement, with Maker hoping to draw near demand for DAI minting through the reduction in fees.

When users deposit crypto assets to mint the protocol’s stablecoin, DAI, the debt incurs a stability fee that is effectively a unendingly accruing interest that’s due upon compensation of the borrowed tokens.

Maker’s unsteady stability fees are designed to keep up DAI’s greenback peg, as once collateralized debt position (CDP) holders mint additional DAI than the market demands, the stable token’s value may fall below $1.

Increasing the steadiness fee pushes up the price of borrowing DAI, reducing demand for minting the token. Conversely, reducing the fees, as MakerDAO has simply done, drops the price of borrowing DAI to stimulate demand.

DAI’s current supply spiked to an uncomparable high of $5.1 billion on June 16 however has fallen 6% since then to current levels of around $4.8 billion. Demand for the stablecoin has slowed amid fast downtrend in crypto quality costs and falling activity within the DeFi sector.

MakerDAO token holders are presently in the planning of voting on whether to apply flash loan functionality. If passed, the proposal will allow a maximum of 500 million Dai to be minted by individuals for flash loans, ending the existence of constraints that limit the worth of loans based on the availability of volume of liquidity in lending pools.

At the time of writing, 3,184 MKR governance tokens had been mobilized to support the proposal.

MKR is presently down 20% over the past twenty four hours — falling from $2,600 to an intraday low of $2,060 before a minor recovery to $2,200 at the time of writing.