Categories: Ethereum

MakerDAO to Increase Interest Rates to 11.5% Based on Just Ten Voters

Click here to view original web page at www.trustnodes.com

MakerDAO is to again increase the cost of borrowing dai by 4% to 11.5% for the fifth time in about two months.

This latest probable hike comes after suggestions there has been “little attributable impact from the previous Stability Fee increases.”

That’s despite the so called stability fee, interest rate, or the cost of borrowing, rising from 0.5% in February to 7.5%. They say:

“In February, the Stability Fee was increased twice, each time by 0.5%. In March, the Fee was raised by an additional 2%, and then by 4% two weeks later.

The impact of these combined increases was negligible, indicating that neither the target Stability Fee nor the incremental changes were appropriate.

In light of this, the MakerDAO community is moving forward with a Governance Poll to gauge sentiment for an additional Stability Fee increase.”

It remains somewhat strange that these considerable fee hikes have had no impact despite dai’s market cap remaining at roughly the same level with the dollar peg too remaining at sort of the level it usually has been (pictured above), although there has been a slight decrease recently.

What keeps this peg however is unclear because currently there is no incentive to hold dai, with some suggesting the peg is primarily kept by market making bots run by the Maker team.

The cost of 11.5% for a secured loan is far above traditional loans where credit is extended for far more cheaply because effectively they’re taking no risk.

With dai however it is a bit more complicated because first of all they hiked the loans after they “hooked” ethereans on the platform. Such ethereans might now be in a position, so they’d have to take into account other considerations on whether to close their position rather than just the interest rate.

In addition the lack of identification requirements, or any permission, or any forms, might make it more appealing.

On the other hand, a traditional loan based on crypto collateralization gives you actual dollars. While here you might have to go through a few steps, and thus fees, to convert the dai into bank USD, and then to convert that bank USD into dai to pay the loan.

These fees go to MKR holders with MKR holders deciding just how much the fee should be. Meaning there is clearly an incentive to hike it as much as the market can bear with competition very much needed to prevent potentially abusive monopoly like practices.

The entire Maker system is open source, so anyone can just copy paste all the code and launch it on the ethereum blockchain and call it perhaps something not as stupid as Maker Classic, but maybe something like Digit.

That should then give ethereans an option, rather than grumpily or otherwise being stuck with dai which is seems now almost daily demands more and more money.

As you can see in the chart above shared by some analysis, the collective cost has grown 10x from about 10,000 to 100,000 a month with it now likely to go to 200,000 a month.

That’s not accounting penalty fees for liquidation, which itself is some $250,000 for the first quarter of 2019.

Making it interesting in a way because this is now the very first profitable dapp with a clear business model, but on the other hand – as it is becoming so expensive – its competitive use case is becoming less clear.

Copyrights Trustnodes.com

1 Stock You MUST Own Before AI Tech Is Everywhere

This latest probable hike comes after suggestions there […]

cinerama

Illuminati, Mason, Anonymous I'll never tell. I can tell you this, global power is shifting and those who have the new intelligence are working to acquire this new force. You matter naught except to yourself, therefore prepare for the least expected and make your place in the new world order.

Disqus Comments Loading...
Share
Published by
cinerama

Recent Posts

New York Gym Grit Bxng Accepts BTC Payments

Who would have ever thought that working out and bitcoin could ever go together? Well, thanks to a new Manhattan-based… Read More

4 hours ago

Are Whales Behing Bitcoin’s Latest Dips?

A reason for the recent up-and-down behavior of bitcoin may have been uncovered. It’s being reported that several whales moved… Read More

4 hours ago

Bitcoin Drops Below $10,000 as Support Wears Thin

Bitcoin (BTC) has once again found itself caught in the throes of a choppy trading range that has provided little… Read More

4 hours ago

Bitcoin Bottomed at $9,080, BTC to Rally Into End of 2019

Once again, Bitcoin (BTC) has stagnated, finding a foothold around $10,000 for the umpteenth time in a matter of weeks.… Read More

4 hours ago

Cresio CIO Comments, New ‘Satoshi’ and BTC Games: This Week in CT Spain

As many of our readers probably know, Cointelegraph has a number of non-English branches, each covering news from different parts… Read More

4 hours ago

VeChain Attends Shanghai International Blockchain Week 2019

SHANGHAI, Aug. 24, 2019 /PRNewswire/ -- From September 14-18, 2019, Shanghai International Blockchain Week 2019, the largest and most influential… Read More

4 hours ago

This website uses cookies. We use these cookies to collect data about your interaction with our website for the purpose of continuously improving your experience with our site. For more information we encourage you to read our privacy policy.

Read More