Maker
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MKR · 20w

Can someone provide me a Hypothetical example of the TFRM in use?

So let's say that 1 ETH is $100, and I lock it up in exchange for 66 DAI. I am 150% collateralized and each DAI is worth $1. To repay my debt and free my ETH I need to pay 66 DAI. Here the target rate is ? (0%?) and the target price is 1. What is the target rate exactly, an interest rate? And how does it affect the target price? Okay now let's say the target price is 1.05 (meaning the target rate is 5%?). That means that for my $100 ETH, I get 66*1.05=69.3 DAI? This means it's cheaper to create DAI (as I get more DAI for the same amount of ETH), and encourages the creation of DAI; hence, incentivizing people to increase to create more DAI (putting market pressure on the price of DAI to come down)? Has this mechanism ever been active? If not, why not? Thanks!
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