Introduction:

The Stability Fee is the afloat interest rate assigned to users who borrow DAI tokens. Holders of the Maker token (MKR), the governance token of the Maker Platform, set the Stability Fee. They can vote to raise or reduce the Stability Fee in an effort to standardize Dai’s value relative to 1 USD. A user must return all of the DAI tokens that were borrowed and pay her Stability Fee (in DAI) to the Maker Platform in order to redeem her collateral.

The users can loan DAI by depositing tokens and its called mint. Also, when they repaid the DAI token and acquire for their deposits it called burn of DAI.

The tokens that users deposited to borrow DAI are ETH, BTC or stablecoins like USDC, USDT and etc.

The daily amount of minted and burnt DAI over time since the beginning of 2022 are utilized to evaluate the stability fee (rate of interest) on DAI loans.

The volume of daily mint and burn and also the net amount of DAI loans are demonstrated in the tow figures.

Based on the circumstances of markets, on occasions like an overflow in demand of DAI which made de-pegging it from 1 USD, MakerDAO raises the interest rates (stability fee) of the loan to decrease demand.

Also in some situations where the demand for DAI decreased, the interest rates (stability fee) are reduced to enhance demand for DAI and kept its price peg at 1 USD.

As shown in the first figure, until May 6 the amount of mint and burn for DAI was near to each other but after this date and experiencing an general market downturn, the MakerDao increased the stability fee and users obligated to repaid their loans.

This statement is verified in the second figure too, as we can see the net amount of DAI decreased very sharply on these dates.