MakerDAO has implemented a series of temporary fee increases to shore up its DAI stablecoin, since recent market volatility has caused DAI’s reserves to deplete. The adjustments came after DAI’s supply fell from $5 billion to $4.4 billion in the last week.
While DAI remains overcollateralized, the protocol faces liquidity risks because some collateral is kept in real-world asset vehicles. If the sell pressure on DAI persists, it could lead to a liquidity squeeze.
To stabilize the protocol, MakerDAO approved fee increases that will take effect on March 10th.
The changes are intended to be transitory, and no automatic reversion is set. While some regard the hikes as a positive start, others are concerned that they are too substantial and could disrupt markets.
The rapid movements highlight the difficulties of maintaining a stablecoin peg during periods of cryptocurrencycurrency volatility and fluctuating market dynamics.
