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MKR · 6w

‘The Stability Fee Is Too Damn High!’ — Rune Christensen Clarifies Common Misconceptions

There has been much discussion lately in MakerDAO community forums about the Stability Fee calculated against the total amount of Dai drawn against collateral held in a Collateralized Debt Position (CDP). We welcome these conversations, as they help us better understand users and very often guide us toward important system improvements. Sometimes, however, even healthy discussion can breed misconceptions, as we are seeing now. When that happens, clarification is needed.

The Main Goal of Community Governance: Dai Stabilization

Maker is a project that relies on community governance, and the main goal of the governance process is to stabilize the price of Dai to around 1 US Dollar. With the market price of Dai now within reach of returning to that peg, the Maker community has proven one of the most central tenets of the governance strategy: The cost of minting Dai with the system can be used to impact the Dai supply, and thus the market price.

This is a huge milestone — a proof point for the project moving forward, as it will give Dai users peace of mind whenever a short-lived softening of the peg is experienced. The strategy of altering the supply through the Stability Fee enables Dai to return to its peg.

Addressing Stability Fee Increases Through Perspective

In light of the above, I will now address three common reactions from the community regarding the last few Stability Fee increases. I hope that by offering my perspective on each and my expectations of Multi-Collateral Dai (MCD), I can provide rationale that steers the conversation in a more valuable direction.

But first, I want to emphasize again that the Stability Fee is a risk parameter designed to address imbalances in supply of, and demand for, the Dai token. If there is too much supply and not enough demand, the way to get Dai closely pegged to the US Dollar and highly liquid is to reduce demand by incentivizing CDP owners to mint less Dai and/or burn existi...

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