I'll be voting no on this. it's impossible to have a coherent strategy with all the stability fee changes. I'm sure the early whales will dictate this vote and all that follow. Look at MKR distribution
You are speaking as a borrower, not as a MKR holder. As a MKR holder, I am much more interested In keeping a stable Dai or the value of my MKR goes south. That is the way it is supposed to work. MKR holders are responsible for good governance or it comes out of our pockets. You are looking to the wrong platform if you want a stable interest rate or stability fee. That is not how it is designed.
Is there past evidence to support these minor changes (+/- 0.5%) actually having any kind of response on dai supply (subtracting heavy noise from large ETH movements). From my limited pov, this doesn't even make me blink if I wanted to add more dai against my cdp
Yep, this was also the conclusion from the data examined at the last governance meeting. The switch to a more regular cadence of smaller changes was originally adopted in response to a lot of people who were upset with the large 2% changes, but there is now quite some data that shows that a 0.5% increase has no measurable impact at all, and at the same time Dai looks to be on a downward trend that is getting worse and worse despite the small increases, so next week the topic will be to decide at what magnitude we will have to do future changes at. Right now it is not too far from getting to the critical point where general market faith in the peg and the will of governance to protect it could evaporate. Decisive action is needed, and if we act in time we should be able to correct the peg and regain market faith in Dai's stability.
Has the price of ethereum not much more influence on the "downtrend of DAI". Now the ethereum price increases, existing CDP holders can create more DAI with the same amount of collateral, which will slightly downtrend the DAI. When Ethereum decreases in price, CDP holders will lower their debts with DAI (or increase their collateral) to prevent to get liquidated which will slightly uptrend the price of DAI.
In my opinion the stability fee should be much more correlated to the price of maker. When I opened a CDP in december i also bought (an excess amount of) MKR to pay off the stability fee. In december the price was $366/MKR (against a 0.5% fee). So for me personal a 1.5% fee will have no impact now the price of MKR is $680/MKR.
If we're not far away from critical failure, I'd rather see a bigger increase first than just 0.5% and adjust that downwards if needed. If we let the peg go wild, the damage to Maker reputation would be huge.
Perhaps we're letting Dai marketcap grow too fast compared to ecosystem around it
I just checked the dai price on coinmarketcap and it seems to be solidly on 1$ on exchanges so I wonder, are your warnings based on market maker inventory levels or some other data that isn't perhaps available for normal users?
>Dai looks to be on a downward trend that is getting worse and worse despite the small increases
I fail to see this. I must assume you are referring to the chart posted in chat after the meeting. All that chart says is that there is slightly more 0.99 than 1.01.
It is not a foregone conclusion but there are multiple data points that do seem to be worse today than e.g. right before the last increase was made. If you watch the governance meeting you can see the various charts. One thing that wasn’t brought up this time was market maker inventory, which doesn’t seem to be getting worse but still is stretched to its limit meaning that just a small further imbalance will begin to have greater impacts since it can’t be absorbed by market makers
No, we have no clear data to suggest that .5% has a direct affect on inventory. This market is chaotic at best and the confounding variables are many. The plan for now is to set up a regular cadence of increases until we gather enough intel to determine the correct rate stepping. The general thinking in the meeting seems to be every week or two we try another 50 bps.
In this way we can get a good sense about where the tipping point is without running the risk of over-compensating.
There is also the possibility that this introduction of scheduled changes will serve a 'forward guidance' function as well.
I really dislike the perspective that you'll keep adding 50 bps every few weeks to see how supply reacts. US persons who use CDPs to leverage ETH have important tax consequences from selling ETH to repay DAI. They can't adjust every couple weeks.
It is really sketchy that you guys change fees so often.
A huge part of the CDP value proposition is the low % of a loan. Many crypto investors can already get relatively low % lines of credit that don't involve complex and risky collateral liquidation mechanics.
You're not owed a constant and below market interest rate. No one is forcing you to leverage yourself. Ensuring dai maintains the peg is FAR more important than ensuring short term appeasement of leveraged "crypto investors".
I agree with the stepping and interval (maybe 1 week/50bp?)- should help with painting a better picture of the situation, where everything is kind of still theoretical at this point. I bet this could get up to 4-5% before seeing significant effects on supply though. The interest rate compared to similar solutions on the market is very low. I've seen competitors offering 8-16% APR loans on locked up assets...
Why would the governance team think that 2 weeks of data has statistical significance? Changing rates so fast - up or down - is not giving the market enough time to react.
The US Fed changes rates at most every two months.
There isn't a governance team, we aggregate and discuss data in the governance calls which anyone is free to join, and I'm not aware of anyone who has stated that 2 weeks is significant. The plan is to keep collecting data and making changes until we do have something significant.
Comparing MakerDAO to the US Fed is a faulty analogy. Our stability fee balances 80 million in DAI generated from a few thousand CDP owners in an extremely unstable and reactive micro crypto-economy. The US Fed manages the most complex financial ecosystem the world has ever known and is responsible for the stability the global reserve currency. We can afford to be a little more nimble.
Awesome response, and I think there is a good discussion to be had that until the DSR is in place we might see that the market thinks that the risk on Dai is 2 cents. How we deal with that in the short term is an open question. You should come to the governance call if you get a chance this Thursday. I'll make a note to bring up your post.
Supply nearing 90million, when should the community start discussing raising the ceiling or introducing variable interest rates for the small % of wallets generating most of this dai (I know they could break it up into smaller amounts, but it adds an extra layer of complexity juggling more wallets which might dissuade people vs. the current system)