- The Maker Foundation has proposed a change in its protocol to reduce the stability fee for DAI and Sai to zero.
- Moreover, the proposal also considers that DAI holders should not earn a profit from the DAI Savings Rate (DSR).
The Maker Foundation has proposed a change to its protocol and risk parameters. The announcement consists of a proposal to reduce the Sai stability fee from 7.5% to 3.5% and the Dai stability fee from 0.5% to 0%.
Has the MakerDAO protocol failed?
The proposal was made on Thursday, March 12, during a governance call. On that date, the crypto market suffered one of its worst crashs of all time. Bitcoin and Ethereum registered their biggest drops in the last 6 months. MakerDAO, MKR recorded a 58% loss in one day. In addition, some vendors reported a “vulnerability” in the MakerDAO protocol that was exploited.
When Ethereum’s price fell by half, numerous borrowers saw their collateralized debt positions (CDP) liquidated at 100% of their value. As one MakerDAO user explained, liquidations should have cost between 30% and 40% of the borrowed funds. However, the rapid decline in ETH prices also affected the speed of the Ethereum network and caused congestion, which was at its highest level since November 2018. For this reason and due to the high gas price, the “keepers” did not participate in the auctions of MakerDAO.
As a result, the Maker Foundation decided to implement the changes to its risk parameters. In addition to the above-mentioned reduction in stability fees, the proposal provides that users with DAI at the DAI Savings Rate (DSR) will not receive interest on their funds in MKR. In addition, the proposal provides for a reduction in the issuance of the MKR token.
This is not the first time that MakerDAO reports a failure or vulnerability. In November 2019, a price collapse of ETH led to CDP liquidations of more than USD 3 million. Guarantees also fell from a peak of 360 % to 295 %.
It remains to be seen whether the proposed changes will be implemented and whether they will have a positive impact on the performance of MakerDAO in view of the increasing volatility in the crypto market.