MakerDAO Doubles D3M Maximum Debt Ceiling to 2.5 Billion DAI

According to Blockworks, MakerDAO, the creator of the DAI stablecoin, has experienced high demand for its product. SparkLend, a borrowing and lending platform organized as a sub-DAO within Maker, has issued so much DAI in recent weeks that it needs authorization to lend more. In a governance vote approved on Thursday, Maker voted unanimously to double the D3M maximum debt ceiling to 2.5 billion DAI. The D3M, or Decentralized Debt markets Module, is a mechanism designed to optimize the DAI liquidity across different DeFi platforms. The module automatically adjusts the DAI borrowing rates on external platforms, such as Aave , to be in line with the Dai Stability Fee within the MakerDAO system.

The change was motivated by the rapidly accelerating demand for loans at SparkLend in the past week, which left available DAI falling to 250 million. Maker's risk experts lobbied in favor of the increase, arguing there's no need to keep it so constrained. The protocol is growing at an average rate of around 20 million DAI per day, according to Monet-Supply, an analyst with Block Analitica. The increase in demand for loans poses a risk of unintentionally hitting the D3M maximum debt ceiling and artificially limiting Spark's growth.

MakerDAO recently more than doubled stability fees across the board on March 10 following an executive vote. The Dai Savings Rate (DSR) jumped from 5% to 15%. Stablecoin yield opportunities have been on the rise, leading traders to swap DAI borrowed at low rates for higher yielding USDC or other stablecoins used in DeFi. This dynamic puts downward pressure on DAI's dollar peg and pushed Maker's PSM module, which allows swaps between DAI and USDC, down to record lows. Spark developer Sam MacPherson, CEO at Phoenix Labs, said during a discussion that current rate levels are "almost certainly not sustainable" in the long run. For stablecoin holders right now, times are good, with many options to receive relatively safe double-digit yields. The question is, how long can it last?