Because it was the first stablecoin that Ethereum backs, DAI’s circulating supply hit an all-time high of $5.1 billion. It has since dipped to $4.8 billion due to supply constraints (a 6 percent drop). Since the dip, the situation has not improved, particularly concerning. Cryptocurrency is currently amid a severe correction, with the prices of various digital currencies plunging steeply.
The demand for stablecoins has been relatively low for some weeks. This predicament is a source of concern for several DeFi platforms, prompting some of them to reassess their business models. MakerDAO, for example, is planning to lower its stability charge to increase demand for the DAI stablecoin, which is currently in short supply. In addition to stablecoin loans, customers can use other digital currencies like Ethereum (ETH) as collateral in the course of their business operations.
The Pledges of MakerDAO
The price of DAI can fall when holders of Collateral Debt Positions (CDP) mint more DAI than the market requires. In the same way, an increase in the stability fee results in an increase in the cost of borrowing DAI. As a result, the stablecoin’s demand falls, and its price may go below $1 in the future.
It is also conceivable to find yourself in the opposite circumstance. When the supply is limited, but the demand is tremendous, the value of DAI rises. And this is precisely what MakerDAO is attempting. Increased demand is more likely to occur when the cost of borrowing is reduced, which is achieved through the platform.
MakerDAO pledges to lower the cost of borrowing, with the short-term goal of increasing demand for DAI. At the very least, it will help alleviate the current DAI issue. Understanding how the market operates is critical to comprehending the company’s business plan.
MakerDAO token holders are now debating whether or not to add a flash loan feature in their tokens. If this ruling upholds and implements, people will issue 500 million DAI to inject more variety and variety into the flash lending market. There will undoubtedly be ramifications from this policy, including lifting existing restrictions on loan values that tie to the volume of liquid assets found in lending pools.
MakerDAO takes action due to the declining demand for stablecoins, which has caused concern. The DeFi platform has decided to cut the DAI stability cost by a certain amount. Although the effectiveness of the measures did not yet demonstrate, experts generally believe that this was a wise option.
A total of 3,184 Maker tokens (MKR) mobilize in favor of the proposal are still up for a vote today. The MKR dropped by 20% for the past day, plunging from 2,500 USD to 2,060 USD. Despite recent increases, its value remains lower than a few months ago.
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