PSM Governance Timeline

Recent update, I’m sure. (I swear it was 0.4%!!)

Nope, always was 0.04%. 0.4% would never make sense for stablecoin-to-stablecoin swaps

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This community is great, but is totally out of their element here. Instead of focussing on other verticals to earn fees, we should focus on long-term and sustainable (!!!) ways to restore the peg not on copying whatever protocol is currently hyped and see how their functionality could help restore the peg.

The arguments for the PSM seem to be really focussed on drifting away from DAI as a product instead of finding ways to restore the peg. The recent comments about loans and flashloans make me even more worried about the path this community is going.


Only “Governance Poll”, no MKR Holders poll ?

On-chain Governance polls are done using the MKR token.

20th July - On-Chain Governance Poll: “Does Maker Governance want to implement the Peg Stabilization Module proposal in some form, targeting implementation at the end of July?”

Why nothing here

Click on Polling
Direct Link to PSM poll


I second @Jtathmann’s point of a pretty tight spread on the fees (~0.04% or so) and an initial debt ceiling of around ~50M.

I heard some discussion on the last governance call about setting the fees to something like 5% or more. This seems like the wrong approach to me.

I hear the concerns of Rune and others regarding 3rd parties not integrating Dai because of the peg. If we really want to get some next level liquidity available, then I think a tight spread on the fees is the way to go. We want to be able to go from 10M USDC to Dai (and vice versa) with minimal slippage to onboard these larger players and build trust in the system. This is currently not available, and I doubt fees of 5% or even 0.5% are reasonable to allow this to happen. In my view it’s trust, trust, trust at this stage, and we need to provide these guarantees that if I’m in Dai, I will be able to get back out into fiat via USDC without massive slippage.


If I’m thinking correctly, there would be no slippage through the PSM, and just the nominal transaction fee. I think a high-volume, no-slippage system is something that the DeFi ecosystem would eat up, and might provide rationale for increasing the transaction fee from USDC-> DAI a smidge more

Exactly. I was talking about slippage from current market making. PSM would solve this.

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Completely agree. Low fees ~0.04% are critical. Let’s first show that it works to restore the peg. That’s more important than MKR income right now - even for the value of MKR itself.

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I think a tight fee band is a good idea, but will 50M DAI really bring the peg all the way down to $1, or even $1.0004? I’m doubtful. In addition to a tight, symmetrical fee band (0.04% fee in and fee out), I would also advocate for some wider, asymmetrical fee bands, eg:

2% fee in, 0.2% fee out, 50M DC
5% fee in, 0.1% fee out, 100M DC

I bet independent market makers will be much more comfortable selling/shorting DAI if they are confident the DAI price is capped in the 1.02-1.05 range.

I’m optimistic 50m Dai sell order will restore the peg. Almost all the Dai generated over the last few weeks has been deposited in Compound where it does nothing to restore the peg. People are afraid to sell Dai right now because of difficulty buying it back and lack of confidence peg will be restored.

So this range would effectively provide the same function as USDC-B vault?

Isn’t PSM designed to be a liquidity provider of last resort?

  • Fee In : 1.5%, then 1%, then 0.5% (stop if the peg is restored)
  • Fee Out : 0% (to reduce USDC custody risk at the minimum)
  • Debt Ceiling : unlimited (more on that below)
  • ERC20 : USDC, then the Paxos stablecoins

Those setting would enable the ability to buy DAI at 1.015 USDC then 1.005. We can discuss if a cap at 1.005 is close enough to 1 for DAI users (I would say close enough).

When peg return close to 1 (starting at 1.003 for Uniswap users), the PSM USDC will be drained by arbitrage (less expensive than any alternative).

On the unlimited cap, it means the willingness to increase the ceiling each week if needed. It will avoid any significant arbitrage risk if USDC fails. Still, this “whatever it takes” approach will send the right message to the public, anyone buying DAI at 1.015 or above will lose 1%. The ceiling will have to be reduced if not used.

The main risk is if the community think DAI deserve a premium to USD (or any other USD alternative). Let’s hope collateral onboarding will provide enough supply while keeping counterparty risks low (diversified). In any case, the peg will be hit, the more the USDC PSM is filled, the less valuable DAI is (at the limit USDC risk + MakerDAO risk can’t be more valuable as only USDC risk).

If we want to provide liquidity of first resort, we can provide liquidity to trading pairs on Uniswap and balancer. That would be great to bring value to DAI usage. Much more an ecosystem building strategy. I like it. But this isn’t the same problem.

Due to the recent communication from the Foundation about the PSM, I don’t believe that it makes sense to continue polling past the current point, and I will not be putting up more PSM polls at the current time.

While we could vote on parameters, I suspect that by the time the community has organised around producing the PSM themselves, the macro environment will have changed significantly enough that they would no longer necessarily be valid.

If members of the community do want to continue pursuing the PSM concept, I would suggest that someone creates a Declaration of Intent (MIP13) and passes that through the MIPs process.


The sandbagging on the PSM poll is extremely disturbing. Until MKR has delegation + automatic vote deadline extension on lead changes, that kind of last-minute vote dump to switch the outcome has terrible optics.

The community obviously wants PSM, no other topic has had this level of engagement for a long time.

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The on chain poll results say otherwise:

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@lix Lets be honest, it’s a razor thin line.

@IslandHunting With regards to the sandbagging, the only thing I can suggest in the meantime is to make sure you vote with your MKR if you have it. There is something like 280k in DSChief, only 40k voted in the PSM poll.

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