## The DAI stablecoin looks set to double stability fees to 7.5% a year

MakerDAO (MKR) token holders are yet again voting to decide whether they should increase DAI “stability fees” from 3.5% all the way up to 7.5% following three previous rate hikes for the stablecoin protocol in 2019.

Stability fees are charged when a user uses the MakerDAO platform to create DAI stablecoins by locking Ethereum (ETH) into the project’s CDP (Collateralised Debt Position) contracts. The amount of ETH needed to generate DAI depends on what level of collateralisation a user chooses when creating the contract, but at the time of creation, they must have at least 150% of the USD value of DAI created based on the current USD price of ETH.

If a user chooses to cash in their DAI and unlock the Ethereum from the CDP, they must then pay the stability fee, which is currently set at 3.5% a year.

Commenting on the new vote, the MakerDAO team has said that a larger increase could now be considered given the perceived differential before CDP users are incentivised to start aggressively closing CDPs.

The team said: “Depending on the potential short-term risks of a misaligned peg, a 4% increase could be warranted to swiftly close the gap.

“If the vote goes through for a 4% increase, it would be the largest one-time raise and runs the risk of overshooting our estimate.”

The MakerDAO project previously said that “a stability fee increase is warranted” because the “exchange price of Dai across several major exchanges, such as Coinbase Pro and Bitfinex, has been consistently hovering in the $0.975 to$0.985 range for 1–2 months”.

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