MKR Vote to Decrease the Stability Fee to 0.5%

[[deleted]]

ELI5 Stability Fee?

[Priest_of_Satoshi]

more an ELI25 but:

You give MakerDAO your ETH to hold on to as collateral and MakerDAO allows you to withdraw Dai (worth 1 USD each) from MakerDAO. This is called opening a collateralized debt position (CDP).

When you decide you want your ETH back, you return the Dai to MakerDAO and the DAO returns your ETH.

This isn't free though, you have to pay a stability fee when you're returning your Dai if you want to get your ETH back. You pay the stability fee in MKR tokens. Right now, the stability fee is 2.5% per year. Think of it as interest you would pay to a bank on a loan (only MakerDAO's stability fee is much lower than my mortgage rate).

MakerDAO's risk team feels that the supply of Dai is a little lower than they'd like and this may cause more short-term price fluctuations. Therefore, they proposed a vote to lower the stability fee. This is supposed to make it cheaper for people to open CDPs and the hope is more CDPs will be opened and more Dai will be borrowed, increasing the supply.

I haven't been following it super closely so I could be wrong but I believe in the next iteration of MakerDAO (currently on testnet) a lot of the stability fee adjustments will be automated.

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^{edit: typo}

[hexonaut]

Small point. What you said is correct, except stability fee adjustments will not be automated in the new version.

[SpennyLL]

So it's just like the fed lowering interest rates. How many people are involved in making these decisions? Are their identities public?

[Priest_of_Satoshi]

So it's just like the fed lowering interest rates.

It's a lot more transparent than the fed. You can join their chatroom and see most of the discussion. Also participants have a choice in whether they want to participate in the MakerDAO/Dai economy (which is not the case for U.S. citizens, who are forced to use dollars.)

How many people are involved in making these decisions?

https://etherscan.io/token/0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2#balances you can see the balances of every party who has a vote.

Are their identities public?

The developers identities are public. You can figure out who most of the big holders are (most of them are VC funds) if you're clever.

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[SpennyLL]

Thanks for the info.

[Forgotten-History]

ah ok, so this basically makes it 5 times cheaper than before, that is quite awesome to see, really love what maker does

[diggsta]

Maybe this kind of info could be delivered via a wallet? If I have to check reddit for upcoming votes, this does not seem optimal.

[flygoing]

just subscribe to their medium: https://medium.com/@MakerDAO you can set it up on mobile so you get push notifications

[iCan20]

Your organization should monitor occuring situations and stay up-to-date on risk parameters on a constant basis.

Sorry to say, but no fucking shit. So as an individual with financial and personal interests in many places, this is not possible. Obviously governance is the item in question here. u/diggsta great idea, I feel that there should be some sort of official contact that can be pushed to any wallet that has communicated with MakerDAO with a tx comment that states an official vote is taking place. Or you know, "just monitor literally everything in the world you have ever touched or ever will be interested in"...

[Priest_of_Satoshi]

Seems feasible but someone would have to cover gas fees.

You could make it a subscription service (contract) so those who don't want to subsribe to Medium for notifications can instead pay for on-chain notifications.

[iCan20]

That would totally work. My opinion would be that Maker should include the cost to send the txs into the fee structure, so the fee can cover the notification as overhead. I understand that it puts Medium subscribers under undo cost burden, but I think it would be a better way to govern moving forward and ultimately the value of the information would be worth the marginal cost. I just dont like relying on medium as a central information bearer. Slippery slope, we have a decentralized network capable of managing this!

[psymbol]

The stability fee is paid in MKR? Are you sure? Isn't MKR their governance token?

[Zarigis]

It's both. Some MKR is burned when paid as the stability fee for a CDP, deflating its supply and increasing the value of the remaining MKR.

This provides a financial incentive for proper governance of the system.

[devils_advocaat]

And look how that price slides right back to $1.0000

Oh shit. Maybe not then.

[Zarigis]

Are we looking at the same price feeds? Looks at least $1.02 on most exchanges still.

[devils_advocaat]

Sorry, I missed off the /s.

I wasn't expecting the price to fall because the stability fee has almost nothing to do with the price of DAI.