In a recent development, MakerDAO, the organization behind the MKR token, has passed a crucial Executive Vote with the aim of strengthening the Dai Protocol. This decision was made in response to increased market volatility and positive market sentiment, which has reduced reserves for their stablecoin Dai (DAI).

The decision follows a sharp drop in Dai supply from $5 billion to $4.4 billion in just one week, a worrying development highlighted in a proposal from BA Labs, part of Maker’s Stability Advisory Council.

Accelerate approval process

The adopted proposal proposes to accelerate the approval process for stablecoin stability measures, should users decide to redeem some of the available $1.1 billion in Real-World Assets (RWA). Although Dai currently has sufficient collateral, the proposal highlights potential liquidity issues that could arise if Dai’s sale continues, especially given the use of RWA vehicles as collateral.

The proposal emphasizes the need to anticipate potentially unpredictable user actions, given the stable state of the MakerDAO ecosystem. The proposed measures include adjustments to Maker Vaults, SparkLend DAI Borrow Rate, the Peg Stability Module (PSM), the Dai Savings Rate (DSR), and the Governance Security Module (GSM) Pause Delay.

Increase to stability compensation

Key adjustments include increasing the stability fees for various collateral assets from 15% to 17.25%, and increasing the SparkLend DAI Borrow APY from 6.7% to 16%. These changes will become effective on March 10, 2024 at 7:55 PM UTC. Furthermore, MakerDAO plans adjustments to the PSM that will reduce the cooling-off period for raising the debt ceiling from 24 to 12 hours, an increase in the Dai Savings Rate to 15%, and a reduction of the GSM Pause Delay from 48 to 16 hours, in order to accelerate the implementation of future adjustments.

Although these adjustments are considered temporary, there is no automatic process for reversing them. GFX Labs, a research and development company specializing in blockchain, commented positively on the direction of the changes in a response to the proposal’s discussion page. However, concerns have also been raised about the scale of the changes, with fears of potential market disruptions.


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