MakerDAO cuts stability fees as demand for stablecoin slacks

Decentralized Financial Lending and Stablecoin Protocol MakerDAO has adjusted stability fees for a variety of crypto assets used as collateral on the platform.

The move comes as demand for DAI and other stablecoins has cooled amid the recent retracement of the crypto market, with Maker hoping to increase demand for DAI minting by lowering fees.

When users deposit crypto assets to mint the protocol’s stablecoin, DAI, the debt incurs a stability fee, which is effectively a continuously accruing interest rate due upon repayment of the borrowed tokens.

Maker’s fluctuating stability fees are intended to maintain the dollar peg of the DAI, as the price of the stable token could drop below $ 1 if holders of collateralized debt position (CDP) coin more DAI than the market demands.

The increase in the stability fee increases the cost of borrowing DAI and reduces the demand for the token to be minted. Conversely, lowering fees, as MakerDAO just did, lower the cost of ingesting DAI to fuel demand.

DAI’s circulating supply rose to an all-time high of $ 5.1 billion on June 16, but has since declined 6% to a current level of around $ 4.8 billion. Demand for stablecoin has slowed amid an accelerating downtrend in crypto asset prices and declining activity in the DeFi sector.

Connected: Analyst says DeFi and stablecoins held up well when the crypto markets imploded

MakerDAO token holders are currently voting on the implementation of the Flash loan feature. If the proposal is passed, a maximum of 500 million dai can be coined by individuals for flash loans, removing existing restrictions that limit the value of loans based on the volume of liquidity available in loan pools.

At the time of writing, 3,184 MKR governance tokens had been mobilized to support the proposal.

MKR is currently down 20% in the past 24 hours – it fell from $ 2,600 to an intraday low of $ 2,060 before rebounding marginally to $ 2,200 at the time of writing.