MIP29 - Peg Stability Module

These can be changed after deployment by governance.

It’s up to governance how they want to set these. It’s possible to leave one or both of them at 0% depending on the size of the debt ceiling. I’m guessing we probably won’t want to set the fees both to 0% as your bracket equation is correct as long as there is debt ceiling or liquidity available to go either way.

This is correct.

This is essentially the case where Dai is trading above $1.01 USDC (not USD). In this case free money is available, and the price will be arbitraged until it reaches $1.01 again (or the debt ceiling is reached).

Yes this would be more against short term price shocks in the other way. Definitely if we sustain a price of < $1 the PSM will clear out quickly and we need to move onto Stability Fee price regulation after that same as before. That being said, this is the case where the tout is set to ~0%. We could increase that if we want to maintain a pool of USDC for extreme price shocks in the other direction. These are all options available that need to be discussed. It’s not really my place to comment on what the fees will be. I’m just putting the code out there.


Note: I’ve updated the design to put the PSM on the other side of the join adapter. Will update the MIP to match shortly.

EDIT: Updated to the new design.

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Hello Sam! Nice work on the simple code btw and thank you for the reply.

I think you miss the point of the example here or I am missing something. The point here is that if the USD value of the stablecoin being exchanged for DAI is depressed we can run into a situation where the PSM is DC maxed. To be fair with the current OSM USD prices on USDC being locked to 1 this hazard exists now. These are the only vaults and collateral types where Maker has locked the OSM prices to $1 and this lock opens up a value hazard if for any reason the stablecoin prices with locked OSM USD prices drop in USD value below the PSM profit margin.

This is a general issue here due to the OSM stablecoin prices being locked at $1 USD and I wondered if the stablecoin OSM prices were to change whether this code would obey those somehow or whether it would ignore them.

I’m not sure if I quite follow. The amount of USDC needed to restore the peg is about 400M, so I don’t foresee any large slippage on USDC/USD with the hard peg in place.

I’m concerned about what would happen if USDT lost its peg, if anyone can trade it 1:1 for DAI how could we keep our peg?

PSM will only work with USDC to start and we, the community, at Maker do not like/trust USDT so I don’t think USDT will ever get added and if it did the DC on it would be very small as to not have too much exposure to that risk.

I’m going to assume you meant USDC instead of USDT. If USDC looses its peg then we would need to take on debt equivalent to the losses same as any other collateral type.

PSM is in front of a vault, and as any vault there is a ceiling.

If the usdc lost its peg, the usdc PSM vault will get full as the USDC-A and B vault.

Both vault carry the same risk.

I am not sure if that answers your question.

Please note I have submitted MIP29 for January’s governance cycle.


This mip was accepted 01/28/21 with the January MIPs bundle



Does this mean that the Dai Peg Stability Module contracts are published on Ethereum? Or that they were just accepted for the executive vote?

The contracts have been deployed and it’s live.

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