Will MakerDAO’s new changes instill confidence in DAI? Examining…

ambcrypto.com:

Leading decentralized finance protocol, MakerDAO [MKR], has proposed changes to its Peg Stability Module (PSM) operations in response to DAI’s recent loss of parity with the US dollar. The proposal seeks community approval to adjust the PSM parameters. These were previously adjusted through a series of emergency proposals to prevent the stablecoin’s permanent de-pegging.

Is your portfolio green? Check out the Maker Profit Calculator

According to the proposal, either of the two options could be explored. The first option would involve diversifying MakerDAO’s PSM stablecoin reserves across multiple assets to prevent risk concentration and “resilience of stablecoin liquidity.”

Under this option, MakerDAO proposes a reduction of USD Coin [USDC] to DAI swap fees and decreasing available debt and debt ceiling for its USDC, GUSD, and USDP PSMs.

The second option that could be explored is the maintenance of USDC as the protocol’s primary reserve. Identifying the risk that could emerge from this, MakerDAO noted:

“However, DAI would continue to have significant exposure to USDC, which may be less resilient on a fundamental basis compared to other stablecoins. This could put liquidations of crypto-collateralized vaults at risk if the DAI price spikes upward in the future.” 

Under this option, the proposed parameters for MakerDAO’s USDC PSM include reducing the USDC to DAI swap fee from 1% to 0% and increasing the target available debt from 250 million DAI to 400 million DAI. For its GUSD PSM, the proposal seeks to reduce the GUSD to DAI swap fee from 0.1% to 0% and increase the target available debt from 10 million DAI to 50 million DAI, among other changes, among other changes.

At press time, 53.93% of the total votes cast favored