Negative DSR / TRFM

I agree with the conclusions here that implementing negative rates/mandatory DSR by adjusting token balances is technically not workable because of integration concerns (most smart contracts do not work well with balances that change independently). However, negative effective interest rates can be achieved by Target Price adjustment, as proposed in this MIP:


Changing Dai to not be worth $1 breaks most of the existing PMF. We need a solution that keeps the $1 peg.

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There is no way to charge a fee to DAI holders without it resulting in DAI being effectively <$1. As such the lowest possible DSR will always be 0% if you want to keep 1DAI = $1 USP.

However, my proposal is to temporary break the 1DAI = $1 while DAI demand is excessive. As soon as the peg is restored you can begin raising the target rate of 1DAI back towards 1USD. So in the long-run we should see 1DAI = 1USD due to inflation making DAI unattractive to hold at 0% DSR.

Is temporarily breaking the USP, until we can scale the supply side of MakerDAO


Creating DAI from thin air is a bit too extreme. Maker is not Tether.

The central banks don’t print money, they swap cash for a safe collateral (gouv bonds).

It seems that USDC is not good collateral enough for the Maker community. I get the custody risk/centralization risk.

Isn’t buying cDAI and/or aDAI a good option if we trust those protocols (i.e. lending DAI on Compound/Aave)?? xDAI is DAI + interest rate + protocol risk. That’s the closest thing to a government bond. That way, we can control the DAI interest rate on Aave and Compound.

PS : It was already (but briefly) mentioned here (Governance and Risk Meeting: Ep. 99) as QE for DAI and here in the PS. I don’t think it’s that nuclear.

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Anything is better than allowing the peg to float upwards into the clouds. No PSM from the Foundation. Negative rates have too many technical problems vis a vis ERC-20 etc. That leaves us with a number of options, IMO:

  1. Subsidize Dai creation via a small MKR token issuance credited to borrowers. Note this approach has resulted in a large positive Dai interest rate on Compound.
  2. Allow the protocol to create and sell unbacked Dai in exchange for collateral such as ETH, MKR etc.
  3. Allow the protocol to create and sell unbacked Dai in exchange for collateral such as USDC.
  4. ???
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  1. MKR isn’t too popular among investors ATM
  2. Possibly
  3. No
  4. Pause ETH liquidations (we did that for all stablecoins!)