The Ethereum community’s rising stablecoin star, the Dai, continues to trade slightly below $1 USD as community stakeholders once again move toward making it more expensive to self-loan Dai in a bid to correct the coin’s dollar peg.
The mechanism for doing so, the Dai Stability Fee (DSF), is a key element to how MakerDAO’s dual-token ecosystem responds to Dai price fluctuations.
At the heart of that ecosystem is Maker’s increasingly popular collateralized debt positions, or CDPs, wherein users can collateralize ether (ETH) via smart contracts to take out Dai loans without facilitation from a third party.
The DSF is the annual interest rate, charged in Maker’s governance MKR token, that users must pay when they’ve paid off their CDPs’ Dai balance and want to take control of their self-collateralized ether again.
Several Maker governance votes have been held in recent times to raise the DSF in order to stem demand for open CDPs. The idea has been that raising the price of these positions will lead to more users closing out their CDPs, which burns Dai and thus serves to push the stablecoin’s price back toward its peg.
Back in March, the DSF was raised from 1.5 to 3.5 percent, which acutely helped the Dai price. After the stablecoin continued to slightly dip, the Maker Foundation Interim Risk Team created another voting proposal to raise the rate to 7.5 percent and then another to as high as 11.5 percent. A vote is being held to finalize that latter fee, and it looks like it will pass.
The backdrop of the potential raise was highlighted again on Wednesday as, the Dai price temporarily dipped below $0.96 before shortly recovering to above $0.98.
Notably, the resilience of the Dai peg was celebrated during the cryptoeconomy’s 2018 bear market, when the coin managed to keep its $1 USD valuation in the face of several deep crypto selloffs. However, that peg has since faced pressure as the cryptocurrency space is seemingly turning bullish once more and more CDP users appear to be taking out Dai, and keeping their CDPs open in the process, to long ether and other cryptocurrencies.
The Maker Foundation Interim Risk Team, which helps steer monetary policy in the Maker ecosystem, have argued that raising the fee again is the best way forward for now:
“An examination of the available data strongly suggests a Stability Fee increase is warranted. The exchange price of Dai across several major exchanges has been consistently hovering in the $0.96 to $0.99 range for two months. Decentralized exchanges with sufficient volume/liquidity also confirm the same discrepancy.”
Whatever happens from here, it’s clear all eyes are on Maker — it’s the largest decentralized finance (DeFi) project in the cryptoverse in having more than $385 million worth of ether locked up in CDPs at present.
MKR Makes It Onto Coinbase Pro
As the Maker ecosystem continues to grapple with the Dai’s stability, the profile of the MKR token has been raised upon its fresh listing on Coinbase Pro, the exchange’s advanced trading platform.
Trading on our EOS, MKR and REP order books is about to begin. Order books will now enter post-only mode. Customers can post limit orders but there will be no matches (completed orders). Order books will be in post-only mode for a minimum of 1 minute. https://t.co/pUlU8fppAd
— Coinbase Pro (@CoinbasePro) April 9, 2019
At the moment, MKR will only be supported on Coinbase Pro in jurisdictions outside of the United States. That’s surely because Coinbase is erring on the side of caution in case the U.S. Securities and Exchange Commission (SEC) ever deems MKR a security under current American law.
On the other hand, Coinbase may not have to tread lightly on the matter for much longer if the Token Taxonomy Act is eventually passed in the nation. The draft bill was just reintroduced to the House of Representatives, the lower chamber of the U.S. Congress, where its future will proceed to be hashed out. The bill would exempt most crypto tokens from being designated as securities by the SEC.