DAI’s stability interest fee keeps dropping

Today, MakerDAO activated a vote that could bring DAI’s stability fee down to 8.5%. If the vote passes, interest on DAI loans will have decreased a total of 11% since May. 

The stability fee is accrued continuously, and is essentially the interest rate for borrowing DAI. When DAI was released, people remortgage their loans because fees were as low as 1.5%. 

Unfortunately for those borrowers, fees increased as DAI fell below the $1 and kept going up to a peak of 19.5%. This put people into a position where they would have been better off getting a loan from a bank. 

In order to receive a DAI loan, borrowers need to give Maker at least 150% of what their loan is worth in Ethereum. People who take these loans essentially would like to keep their Ethereum position locked while repaying a loan that can be traded evenly for USD. 

Soon, Maker will be activating another vote which if passed will result in more than Ethereum being able to be used as collateral for DAI loans. Notably, people will be able to lock in their BAT (Basic Attention Token) for DAI. 

The combination of dropping interest rates and more options for collateral could result in a rise of DAI supply, moving the price back over $1 in the future.