Where is liqudity sourced from to burn MKR?

As I understand it, users not holding MKR who owe stability fees when their loan is paid back cause the system to market buy MKR to burn using DAI. What markets is this being sourced from? Oasis? Uniswap? I haven’t seen any documentation on this lately.

MKR was only used for payback in SCD. MCD only uses DAI for paying stability fees.


You can view the flap auctions here:

This is how the protocol buys back MKR, with users bidding w/ MKR for lot allocations of DAI.


Thanks @Aaron_Bartsch and @prose11. Apparently I never got fully caught up again. Was quite active in 2016 and 17. Not sure I’m a huge fan of this change, but will need to investigate more. This seems way more likely to fail long term. Why would people burn MKR for DAI given the long term value probably held by such bidder if they are participating in MKR to the point they are bidding on DAI lots? Oh well.

(Usually acquired at a discount, today some actors took part in the auction and use the proceeds to buy MKR, resulting in .3 MKR gain)

1 Like

Thanks, @prose11.

I guess this makes sense. The tax realization on appreciation of MKR from purchase to sale could be rough though. Not sure it would be worth going from a long term holding to short term for capital gains.

1 Like