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Temporary Fee Adjustments during Market Volatility

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Temporary Fee Adjustments during Market Volatility

MakerDAO, the organization behind the development of the Maker (MKR) token, has approved a plan to adjust fees temporarily in order to strengthen its protocol. This decision was made in response to recent market volatility and a decrease in reserves for its stablecoin, Dai (DAI). The proposal, put forward by BA Labs, aims to expedite the approval process for a stability measure related to real-world assets (RWA) held on the platform. The concern is that using these assets as collateral could create liquidity issues if Dai is sold off. Despite the protocol being currently stable, Maker DAO believes it is important to anticipate unpredictable user actions.

The proposed measures involve changes to several aspects of the Maker DAO ecosystem, including Maker Vaults, the SparkLend DAI Borrow Rate, the Peg Stability Module (PSM), the Dai Savings Rate, and the Governance Security Module (GSM) Pause Delay. Specific adjustments include raising the stability fees on various collateral assets from 15% to 17.25% and increasing the SparkLend DAI Borrow annual percentage yield from 6.7% to 16%.

These changes are set to go into effect from March 10 at 7:55 pm UTC. MakerDAO also plans to adjust the PSM by reducing the cooldown period for debt ceiling increases from 24 to 12 hours. The Dai Savings Rate will be increased to 15% and the GSM Pause Delay will be shortened from 48 hours to 16 hours to enable faster implementation of future adjustments. It should be noted that these adjustments are temporary and there is no automatic process for reverting the fees.

While some experts, like blockchain research and development company GFX Labs, support the proposed changes as a step in the right direction, they express concerns about the magnitude of the adjustments. They fear that these changes could lead to market dislocations and disruptions. MakerDAO believes that the fee adjustments are necessary to address the decrease in reserves and mitigate potential risks to the protocol’s stability.

MakerDAO is taking proactive steps to strengthen its protocol in response to market conditions. By implementing these temporary fee adjustments and other measures, MakerDAO aims to maintain stability and address potential liquidity issues.

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