Dai DSR/Stability fee on Oasis

@amadeobrands Amadeo, Great informative video on Defi 101 and I’m in the process of watching the Q&A today. A couple questions to everyone that I had about MakerDao protocol. My apologies if this is too basic… :slight_smile:

Lets assume an example that Oasis is paying 4% DSR on Dai and has a 6% stability fee for opening a CDP. The 4% interest comes from the 6% stability fee paid by CDPs. The 2% spread is then used to buy MKR and then the MKR is burnt. Is that correct?

On a normal liquidation that falls below the 150% liquidation ratio, the CDP holder is charged a 13% liquidation fee. Where do those fees go? Are they converted to MKR and burnt as well?

In the current 0% stability fee/DSR environment, does that mean people can open interest free CDPs?
What is lowering the DSR to 0% trying to accomplish? Trying to get people to open CDPs?

Many thanks!

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Thank you for your question :slight_smile:

Let’s evaluate the MKR tokenmodel (Tokenomics) of Maker DAO to get a better understanding of the inner workings of this system before diving deeper. The MKR token is a crucial part of the DAI stablecoin built on top of Maker DAO.

The Maker DAO token and its features:

  • Utility token
    • Pay stability fee for CDP’s when fee is paid MKR is burned

This accrued fee goes to purchasing MKR off the secondary market, and burning it. This mechanism ensures propers alignment incentive between MKR token holders, and the governance over MakerDAO. Good governance decisions = more MKR burned over time. Bad governance decisions = less MKR burned over time.

MKR Burn rate = DAI Market Cap * Stability fee * TimeMKR Price in DAI

When CDP holders repay their loan, and receive their collateral, they don’t care what the price of MKR is, because their fee is DAI-denominated. They don’t care if their $35 fee is equal to 10 MKR, 1 MKR, or 0.0001 MKR. They just burn whatever $35 of MKR is. This is actually a quite nice user-experience, as this process can be abstracted away from the user.

In order to source the MKR on the behalf of CDP holders repaying their debt, the MakerDAO system takes the stability fee out of the DAI being repaid, and purchases MKR with it on a decentralized exchange (this process entirely automated by a smart contract). Like the user, the smart contract is agnostic to the price of MKR, it just needs to source the USD value of MKR that is owed from the stability fee. If a CDP owner owes $35, the MakerDAO smart contracts puts $35 up for auction, and burns whatever MKR it gets for $35.

Also on response to this check out: https://daistats.com/?fbclid=IwAR19-gHjDfIo8M8tOcFT9M5lewu5xoOq84_gTMV6kKrnRJlhwfFdmnmwICg#/

For some reason I am not getting a savings rate… Would you know anything about that?Screen Shot 2020-05-06 at 7.36.29 PM