Over the last 12 months, Dai had five increments in its Stability Fee and if currently having the sixth voting proposal to increase it by 3 percent to 14 percent. Just a few days ago the fee was increased from 0.5 percent up until September 2018 to 11.5 percent but still, it fails to control its falling one dollar peg.
As an open source project, the Maker smart contracts charges a Stability Fee, that is collected against the total amount of DAI drawn against the collateral held in a CDP, which can be paid in MKR tokens or DAI.
MKR holders that participate in decision making by staking their tokens in votes have already agreed to five different proposals to raise this fee. These constant failing attempts are rising the concerns regarding MakerDao protocol and if it can support a stable cryptocurrency.
This is an absolutely ridiculous statement: "The primary feature of the MKR token as a governance token is that the holder represents the accountable party to the system and has a self-referencing fiduciary responsibility to themselves."https://t.co/vBB7HnZyhW
— Palley (@stephendpalley) April 20, 2019
The result of the persistent imbalance in the token’s demand and supply since February has DAO trading every well below $1 as it hit the lows at $0.96. It is currently hovering between $0.98 and $0.096.
Ryan Sean Adams, the founder of crypto investment company Mythos Capital, in a MakerDAO subreddit post recently shared, that
“At some point soon, it may make sense to lay off the SF hikes and rely on the $100m supply cap to restore the peg in order to complete the SCD phase with a stronger narrative.”
Though he says, the community could continue to “brute force” the stability through constant increases that will eventually work at maybe 11.5 percent or 40 percent,
“what damage will be done to the incredible Maker narrative this project has worked so hard to build?”
I honestly don't get why ppl think $MKR has network effects.
At the end of the day, it is just a service provider. If the fees are too high, it will piss everyone off and then the company and token is worthless.
What am I missing here? https://t.co/cVxd0O5ofe
— Su Zhu (@zhusu) April 20, 2019
Currently, more than 2.09 million ETH has been put as collateral against $87.8 million of total DAI debt. Since October, last year, there has been a constant surge in ETH collateral as it went from 371 to 1867 in January 2019. Though it took a hit in February, March yet again saw an increment in Ethereum collaterals.
Arianna Simpson, the founder and managing director at ASP and an ex-Facebook employee says, the fact that the frequent and substantial stability fee hikes are having a minimal effect on reducing the outstanding supply of Dai is an “extremely bullish sign” for Ethereum, the heavily collateralized asset against Dai debt.
People don’t seem to be closing to their CDPs at the desired rate and this as per Simpson is a signal that either people are unaware of these fee hikes which is an unlikely instance or
“they are so bullish on eth that even an 11.5 or even 14% rate feels rational to pay.”
Bullishness towards Ethereum keeps on rising despite the project being slow in working on its scalability issues. Just recently, we reported EY’s big plans on ETH blockchain and analyst's big price calls that could take its current $170 to well above $300.