Yesterday, DAI hit it’s ceiling of 100 million outstanding tokens. The news was followed by MakerDAO creating an executive vote to raise the ceiling to 110-120 million, and decrease the stability fee by .5%
DAI growth due to MCD?
A lot has been lining up for DAI lately, with the announcement of MCD, (Multi-Collateral DAI) the stability fee being lowered, and easier methods of earning interest on the token.
Multi-Collateral DAI is a new iteration of DAI that allows tokens to be minted with not only Ethereum, but other tokens like BAT and 0x. If the MCD vote passes, users will have to convert their DAI to MCD or risk dealing with volatility. The increase of minted DAI could come from people looking for trading opportunities.
“After MakerDAO calls for a global settlement, DAI will no longer be a stable asset, and will instead track the (partial) value of Ether” – Compound
On the same note, the volatility could be harmful to those unaware of the changes. DAI is listed on Coinbase which is thought to be a more casual platform where investors could be holding DAI and not keep up with each bit of news.
People could be refinancing
One of the original appeals to DAI was that an investor could hold their Ethereum position, create DAI for extra capital, and pay less interest than they would at the bank.
This was short lived as eventually the stability fee (interest rate for minting DAI) increased to around 20% APR. The stability fee is now at it’s lowest point in a while at 5.5%, and possibly decreasing even further.
After the stability fee decreased by 4% in one vote in October, people may have decided to take out loans once more.
An interesting place to transition
Overall, 100 million DAI tokens in circulation is quite the milestone for MakerDAO. But this is the first time that they have hit the ceiling, and that can have consequences.
”if the ceiling is not lifted it may cause a supply and demand imbalance of Dai by allowing demand to outpace the limited supply“ – MakerDAO Github
This quote comes from MakerDAO’s Github page in a thread about emergency shutdown. While they are pushing out a new iteration, Maker has to manage the debt ceiling being hit and the potential of their community not voting to raise it.
We found that their vote to decrease the stability fee by 4% was voted mostly by one party who had 98% of the voting power.