MakerDAO cuts fees as demand for stablecoin slacks

Maker hopes to stimulate demand for its stablecoin DAI again through fee reductions.

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 due to a recent retreat in the crypto market, with Maker hoping to boost demand for DAI mining through reduced fees.

When users deposit crypto assets to mint the protocol’s stablecoin, DAI, the debt is subject to a stability fee, essentially a continuously accrued interest rate that is due upon repayment of the borrowed tokens.

Maker’s fluctuating stability fee is designed to maintain a fixed rate in DAI dollars because if Collateralized Debt Position (CDP) holders use DAI more than the market needs, the price of stablecoin tokens could drop below $ 1.

The increase in the stability fee will increase the cost of borrowing DAI and reduce the need for token mining. Conversely, lowering fees, as MakerDAO just did, will reduce 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 its current level of around $ 4.8 billion. Demand for stablecoins has slowed amid a rapid decline in crypto asset prices and a decline in DeFi activity.

MakerDAO token holders are currently voting on the implementation of the instant loan function. If the proposal were adopted, it would allow individuals to mint up to 500 million Dai for quick loans, removing existing restrictions that limit the value of loans based on the volume of liquidity available in the banking group.

At the time of writing, 3,184 MKR governance tokens have been raised 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 recovering slightly to $ 2,200 at press time.

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