The total DAI supply hits new high, tripling since June as the community keeps on increasing the supply limits to bring the peg to the $1 level as we are reading more in the upcoming altcoin news.
The MakerDAO community approved the vote a few days ago to almost double the total DAI supply and its debt ceiling which indicates how much DAI can actually be mined by its users. The announcement by the Maker Foundation posted a few details about the specific proposal to raise the debt ceiling for USD Coin, Ether, Wrapped Bitcoin, and others.
The proposal raised the debt ceiling for ETH by 80 million to 340 million in total which follows two similar proposals which raised it from 160 million at the start of the month. Ceilings for other coins were also raised as two USDC vaults that had different parameters and were raised by 100 million to 170 million while the WBTC ceiling was doubled to 40 million and the Basic Attention Token limit was raised by 2 million to a total of 5 million.
This raised the maximum supply of DAI to 568 million out of which 367 million were minted so far. The drastic increase was motivated by the fact that the DAI was often traded above its peg of $1 since the Black Thursday crash with a current market price of $1.02 as the deviation was exacerbated by the yield farming wars which started in early June which stimulated the demand for DAI. Since the Maker System ensures that the DAI is both minted and burned at $1, creating new DAI will allow the market price to drop as new supply enters the circulation.
Members from the Maker community explained that the project subsidized DAI minters by setting the ETH stability fee at zero by allowing vault creators to borrow DAI for zero costs. The DAI supply tripled since the start of July but it didn’t restore the peg fully. One important reason why could be the DAI dominance in yield farming. More than 50 million DAI were locked in the Balancer pool to mine the YFII token which is a cloned token that dominated the yield farming liquidity.
The Maker community is trying to find an arbitrage mechanism called the Peg Stabilization Module which creates a chance of directly swapping between the USDC and DAI at a 1:1 rate. The goal is to find some opposition as many are concerned about the excessive reliance on USDC and the fundamental changes to the DAI mechanism of the peg from collateral-backed to market-based pegs.
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