The Stability Fee is a variable-rate fee continuously added to a Vault owner’s generated Dai balance.
Stability Fees are a Risk Parameter designed to address the inherent risk in generating Dai against collateral in Maker Vaults.
A portion of the Stability Fee is diverted toward sustaining the operation of the Maker Protocol, which includes the DSR, Risk Teams, and other costs associated with maintaining the protocol.
Technical documentation on Stability Fees can be found in the Jug - Detailed Documentation subsection of the Documentation Portal.
Stability Fee Rates
The Stability Fee for each Vault type changes as a result of the decisions of MKR token holders who govern the protocol.
These decisions are based on the recommendation of Risk Teams who perform risk assessments on Collateral used in the system.
The Risk Teams may update their proposed Stability Fee when something fundamental changes about the underlying asset or the system as a whole.
Where Stability Fees Go
Stability Fees are collected inside the Maker Protocol’s internal balance sheet.
Once the maximum level of surplus is reached, the system automatically sends Dai to a Surplus Auction. During this auction, Keepers bid in MKR for DAI. Dai is released to the winning bidder while the MKR paid by the winner gets burned.
Calculating Stability Fees
The Stability Fee is continuously compounding interest at a growth rate of x% per second.
Technical documentation about how Rates work in the Maker Protocol can be found in the Rates Module section of our Documentation Portal
If the Stability Fee is set to 2%, it will accumulate at 1.0000000006279371924910298109948% per second. At the end of year one, the user will owe exactly 2% on the principal.
Assuming the user put in 100 Dai, at the end of year one they would have 102.00. At the end of year two, they would have 104.04.
Stability Fees During Emergency Shutdown
During Emergency Shutdown, Vault owners indirectly pay Stability Fees by not being able to withdraw more collateral than the excess in their Vault.