MKR Glossary for Dummies

Easily DAI-gested definitions of MKR system terminology.

Dai Savings Rate (DSR) :

When the value of Dai goes too far off track from the $1 set-point, adjusting the savings rate is one mechanism for price correction:

  • If the market price of Dai is above 1 USD, MKR holders can choose to gradually decrease the DSR, which will reduce demand and should reduce the market price of Dai toward the 1 USD Target Price.
  • If the market price of Dai is below 1 USD, MKR holders can choose to gradually increase the DSR, which will stimulate demand and should increase the market price of Dai toward the 1 USD Target Price.

For the voter: Choose an appropriate spread for the DSR to be adjustable to respond to price fluctuations.

Stability Fee:

The Stability Fee is a fee paid by every Vault owner when debt is paid down or completely paid off. It is an annual percentage yield that is calculated on top of the existing Vault debt. Stability Fees must be paid in Dai only in order to withdraw the collateral leveraged and locked inside a Vault.

The MakerDAO system is designed to cover excess outstanding loan amounts that may not be covered by the liquidation of collateral. Although this is highly unlikely, it would most likely result from a situation that is unforeseeable. This fee covers the amount of inflation during the time the loan is made, administrative costs of the Foundation, and a credit guarantee fee for Maker Holders who are acting as guarantors of the loan. This fee covers the risk and the risk of risk being risky.

For the voter: Select a stability fee that minimizes the risk of under collateralization while maximizing the value returned to MKR holders.

Debt Ceiling:

Two different debt ceilings exist. The “global debt ceiling” is the overall limit on number of Dai in total that the system can generate. “Debt ceiling” refers to the total number of Dai that a vault (collateral type) can generate. This is a limit to prevent the system from experiencing overexposure to one type of collateral. For example, the system would not want to hold so much ETH as collateral that to sell it off would be such a large volume that it could affect the value of the collateral negatively.

For the voter: Choose a debt ceiling that is appropriate to allow the system to grow, but not make the system so heavy in that type of collateral that selling it off would cause extreme market volatility.

Flip Auction:

This is an auction to sell a vault which has dropped below the minimum collateralization ratio.

Flop Auction:

This is an auction that sells newly minted MKR to recapitalize system debt.

TTL:

Bid lifetime / maximum length of a bid.

Auction Keeper (Keeper):

This is an external actor, that can be anyone, who interacts with the system to initiate and bid on auctions.