Stability has become a holy grail for the crypto market, and right now, one of the biggest stablecoins is MakerDAO's DAI. Launched in December 2017 as an ERC-20 token, it's pegged 1:1 with the United States dollar, with its peg being maintained via over-collateralization with ether (ETH). In other words, users receive the equivalent of $1 in DAI by depositing more than $1 in ETH, and they can later reclaim their collateral by repaying the DAI they've received plus a “stability fee” in MKR, MakerDAO's other (nonstablecoin) token. By charging users this additional fee, the MakerDAO system theoretically prevents the value of DAI from dropping below $1, since the fee makes it expensive to mint more DAI tokens.
However, as elegant as this system is in theory, it recently hasn't been working quite as well as intended. DAI has been below $1 for much of 2019 and has even dropped under $0.95 on a couple of occasions. MakerDAO users have therefore voted to increase the stability fee on five separate occasions this year, with the most recent vote on April 11 deciding that the fee will rise to 11.5% per year.
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