# Kolibri Governance Proposal #6 - Continuous Increase of the Stability Fee to Reach Peg
**URL:** https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851
**Category:** Project Updates
**Created:** [March 8, 2021, 11:02pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851 "2021-03-08T23:02:06Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 8, 2021, 11:02pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/1 "2021-03-08T23:02:06Z")
### Summary
Governance proposal #5 was voted on to raise the stability fee from 2% to 2.5% in order to gauge the market reaction, and gather data, while hopefully driving kUSD at least marginally towards the peg target. At the time of proposal #5 being voted on, we were off peg by ~12%, and with the gov proposal now having been live for about 1.5 days, it’s become clear that we need to make more aggressive changes.
As stewards of the Kolibri protocol, our job is to use all means available to us to get kUSD to be as close to $1 in value as possible. In the long term, market conditions may change as kUSD finds more use cases and markets and it becomes more desirable to hold and use kUSD and easier to arbitrage the price.
However, in the short term, the most powerful levers we have to pull are the debt ceiling and the stability fee. We do not believe additional kUSD is likely to aid the protocol as kUSD is trading below peg (and thus leaving the debt ceiling place creates scarcity for kUSD, pushing us closer to peg).
The screenshot below details the past 1.5 days of peg metrics, starting when the stability fee adjustment went live.
Peg volatility between Mar 7, 6:00AM EST to Mar 8, 6:00PM EST (1.5 days)
Holding the debt ceiling constant, it is clear the other lever we have is the stability fee.It’s clear that the previous adjustment was too little to affect the peg in a way that drives it back to target, so we need to continue to increase the stability fee until we see the desired effect.
The metric by which we’ll determine if the peg falls within a “reasonable range” (and therefore stop taking the action voted on below) is when the peg’s [EMA10](https://www.investopedia.com/terms/e/ema.asp) (so a moving average of the last 10 hours) is within 5% of our target on the high side, with any amount being “below peg” being assessed as “within range” for the purposes of this proposal.
### Voting
In order to successfully reach peg and stabilize kUSD, we need to continue adjusting the stability fee upwards with a more aggressive cadence. In order to do that we propose 2 different votes, one to decide on the cadence for adjustments on an ongoing basis until a target point is hit, and the other being how aggressively to adjust the stability fee at each cadence interval.
Vote 1: Stability Fee Adjustment Cadence
- A cadence needs to be selected by which we adjust and reassess the stability of the peg. There is an 8 hour time lock that’s mandatory (and built into the protocol), though we suggest that a minimum of 24 hours (including the 8 hour timelock) is necessary to have all people who use Kolibri a chance to adjust their ovens as they see fit
- Options (all including the 8h timelock): **24h, 36h, or 48h**
Vote 2: Stability Fee Adjustment Rate
- A second parameter needs to be determined which is the amount of adjustment done per adjustment event on the cadence selected above.
- Options: **+0.5%, +1.0%, +1.5%**
As an example, if the winning parameters are **24h** and **1.0%** , that means that every **24 hours** , we’ll be adjusting the fee upwards by **1.0%** (so if the fee is currently 2.5%, in 24 hours it’ll be 3.5%). That will continue until such time that the [EMA10](https://www.investopedia.com/terms/e/ema.asp) (moving average over the previous 10 hours) is 5% or less, at which time the adjustments will cease.
This vote will be open on [the public Kolibri Discord](https://discord.gg/fsBv4jH25R), in the **#governance-announcements** channel for the next **24 hours (on or after March 9 at 23:00 GMT)**, after which time the winning parameters will be signed by the Hover Labs team and injected into the multi-sig timelock (which has an additional 8 hours before activation), and this pattern will continue on the cadence and adjustment selected in this vote.
Discussions for this will be happening in the **#governance-discussions channel** , so please come weigh in on the decision there.
- The Hover Labs Team
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### Author:  [@ZPE1333](https://forum.tezosagora.org/u/ZPE1333)
#### Post date: [March 9, 2021, 6:38am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/2 "2021-03-09T06:38:10Z")
Assuming retroactive governance token distribution for Kolibri ecosystem participants, could any modifications to the distribution plan affect the demand curve for KUSD?
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### Author:  [@trolleps](https://forum.tezosagora.org/u/trolleps)
#### Post date: [March 9, 2021, 6:44am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/3 "2021-03-09T06:44:16Z")
Where did you get that retroactive governance token distribution?
kUSD is supposed to be stable without any governance token, you shouldn’t mix it
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### Author:  [@ZPE1333](https://forum.tezosagora.org/u/ZPE1333)
#### Post date: [March 9, 2021, 6:47am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/4 "2021-03-09T06:47:17Z")
It’s been hinted at pretty bluntly once homebase DAO’s are functional
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### Author:  [@trolleps](https://forum.tezosagora.org/u/trolleps)
#### Post date: [March 9, 2021, 6:49am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/5 "2021-03-09T06:49:58Z")
Can you provide a link?
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### Author:  [@murbard](https://forum.tezosagora.org/u/murbard)
#### Post date: [March 9, 2021, 9:40am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/6 "2021-03-09T09:40:11Z")
Automate the process of adjusting the stability fee directly as a function of cfmm prices, automatically compound the fee so that it can be negative, add batch auctions for liquidation and pretty soon… 🙂
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### Author:  [@trolleps](https://forum.tezosagora.org/u/trolleps)
#### Post date: [March 9, 2021, 9:56am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/7 "2021-03-09T09:56:40Z")
Relying on cfmm prices doesn’t work with the level of liquidity we have ☹
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### Author:  [@murbard](https://forum.tezosagora.org/u/murbard)
#### Post date: [March 9, 2021, 10:00am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/8 "2021-03-09T10:00:06Z")
Depends for what, for liquidation related price oracle, absolutely not, for slow moving stability fees, absolutely yes.
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### Author:  [@trolleps](https://forum.tezosagora.org/u/trolleps)
#### Post date: [March 9, 2021, 10:30am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/9 "2021-03-09T10:30:41Z")
You’d be surprised by the amount of people speaking against raising the stability fee to get back to 1:1 peg. I expect all of them to be scared of the dynamic fee
What would be the benefit of using the price from AMM instead of Kolibri’s?
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### Author:  [@Ryan](https://forum.tezosagora.org/u/Ryan)
#### Post date: [March 10, 2021, 1:06am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/10 "2021-03-10T01:06:19Z")
@murbard / @trolleps I think you both have good points.
In terms of an automated adjustment system, that does seem like an ideal end state (similar to the TRFM in DAI land [The Target Rate Feedback Mechanism: An Introduction - Governance - The Maker Forum](https://forum.makerdao.com/t/the-target-rate-feedback-mechanism-an-introduction/2319)) since it provides an amount of predictability WRT future prices that can be somewhat easily calculated/modeled (if X, Y, and Z happen, the rate is adjusted by N).
That said I tend to agree with @trolleps that this is something that we shouldn’t implement in the short term due to things like low liquidity, and an AMM pool that is currently of size 1.
Ideally (IMO) some automatic TRFM-adjusted fee is based on some VWAP that’s an aggregate between a number of AMMs in the ecosystem to account for spot volatility or even to account for attacks to try to force rate adjustments by external actors maliciously.
Complexity breeds vulnerabilities and while I’m not keen on doing many gov proposals to do fee adjustments, I could see this TRFM mechanism proposing a vote in some way that is then considered automatically, at least until we can build confidence in the TRFM being able to handle things automatically.
EDIT: doing some more reading I found [Stability without Pegs. The time has come for an old idea to… | by Stefan Ionescu | Reflexer Labs | Medium](https://medium.com/reflexer-labs/stability-without-pegs-8c6a1cbc7fbd), and I’m curious what both your perspectives are on that.
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### Author:  [@Ryan](https://forum.tezosagora.org/u/Ryan)
#### Post date: [March 10, 2021, 1:09am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/11 "2021-03-10T01:09:38Z")
Also just FYI to the folks in this thread, we submitted the first adjustment to the timelock not too long ago, and it should be live in ~8h
>
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### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 10, 2021, 8:11pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/12 "2021-03-10T20:11:00Z")
The EMA10 of Kolibri is currently at 21%, which is above our 5% threshold.
The Hover Labs team is preparing signatures for a stability fee change of an additional 1% to 4.5%. We plan to inject this 24 hours after our first request at March 10 23:45 GMT.
We will update this thread when the change has been submitted to timelock.
EDIT: Publicly viewable EMA10 data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
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### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 11, 2021, 1:31am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/13 "2021-03-11T01:31:36Z")
Another 1% raise of the stability fee (to 4.5%) has been submitted in operation hash [ooAvUcLyVerfcNqNDngxnZHi76JLVJWvyQgmnYy2ef413c77hvV](https://better-call.dev/mainnet/opg/ooAvUcLyVerfcNqNDngxnZHi76JLVJWvyQgmnYy2ef413c77hvV).
This increase is now in the timelock for 8 hours, after which time any member of the community may execute it.
At current time our EMA10 is 20.83% (+.37% from yesterday).
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 11, 2021, 8:30pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/14 "2021-03-11T20:30:52Z")
The EMA10 of kUSD is 11.82 (-9.01%) since the last stability fee adjustment.
The Hover Labs Team is preparing signatures to continue to carry out proposal 6 by increasing the the stability fee an additional 1% to 5.5%. We plan to inject this 48 hours after the initial request, on or after March 11 23:45GMT.
We will update this thread when the change has been submitted to the timelock.
Publicly viewable EMA10 data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 12, 2021, 12:01am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/15 "2021-03-12T00:01:35Z")
Another 1% increase of the stability fee (to 5.5%) has been submitted in operation hash [ooK6gdr8s474K8YuF14pzwrUaCMk3EA3qYM59SXhEVDa835KiJz](https://better-call.dev/mainnet/opg/ooK6gdr8s474K8YuF14pzwrUaCMk3EA3qYM59SXhEVDa835KiJz/contents).
This increase is now in the timelock for 8 hours, after which time any member of the community may execute it.
At current time our EMA10 is 13.09% (-7.74% from yesterday). EMA10 Data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 12, 2021, 8:07pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/16 "2021-03-12T20:07:06Z")
The EMA10 of kUSD is 15.16 (+4.36%) since the last stability fee adjustment.
The Hover Labs Team is preparing signatures to continue to carry out proposal 6 by increasing the the stability fee an additional 1% to 6.5%. We plan to inject this 24 hours after the last change, on or after March 12 23:45GMT.
We will update this thread when the change has been submitted to the timelock.
Publicly viewable EMA10 data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 13, 2021, 12:23am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/17 "2021-03-13T00:23:49Z")
Another 1% increase of the stability fee (to 6.5%) has been submitted in operation hash [oo4RvoEE8BXNzfbTtYPe1nK5AYe1Qi1NgN1V95SiL4MKqhucmHz](https://better-call.dev/mainnet/opg/oo4RvoEE8BXNzfbTtYPe1nK5AYe1Qi1NgN1V95SiL4MKqhucmHz).
This increase is now in the timelock for 8 hours, after which time any member of the community may execute it.
At current time our EMA10 is 15.65% (+2.56% from yesterday). EMA10 Data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 13, 2021, 6:11pm UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/18 "2021-03-13T18:11:33Z")
The EMA10 of kUSD is 12.18 (-2.76%) since the last stability fee adjustment.
The Hover Labs Team is preparing signatures to continue to carry out proposal 6 by increasing the the stability fee an additional 1% to 7.5%. We plan to inject this 24 hours after the last change, on or after March 13 23:45GMT.
We will update this thread when the change has been submitted to the timelock.
Publicly viewable EMA10 data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
---
### Author:  [@murbard](https://forum.tezosagora.org/u/murbard)
#### Post date: [March 14, 2021, 12:21am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/19 "2021-03-14T00:21:41Z")
I’ve just learned that the stability fee isn’t credited to kUSD holders, as is usually done in these type of mechanisms. This is a mistake.
The result is that you’re not going to be able to achieve a peg without reducing the circulating supply of kUSD to a minuscule amount.
You might look into updating your contract to ensure that the stability fee accrues to kUSD holders. You can still tack an extra 50 bps on top of that fee to pay for your stability fund and dev fund, but from an economic standpoint, Kolibri isn’t going to work if the lion share of the stability fee isn’t paid to kUSD holders.
---
### Author:  [@keefertaylor](https://forum.tezosagora.org/u/keefertaylor)
#### Post date: [March 14, 2021, 2:30am UTC](https://forum.tezosagora.org/t/kolibri-governance-proposal-6-continuous-increase-of-the-stability-fee-to-reach-peg/2851/20 "2021-03-14T02:30:12Z")
Another 1% increase of the stability fee (to 7.5%) has been submitted in operation hash [ooedfWbxvqnp96w2qj3eA3KBjUhzTmdZpQNQhoM9TF3KREE6wjh](https://better-call.dev/mainnet/opg/ooedfWbxvqnp96w2qj3eA3KBjUhzTmdZpQNQhoM9TF3KREE6wjhooedfWbxvqnp96w2qj3eA3KBjUhzTmdZpQNQhoM9TF3KREE6wjh).
This increase is now in the timelock for 8 hours, after which time any member of the community may execute it.
At current time our EMA10 is 15.65% (-3.36% from yesterday). EMA10 Data is available here:
[https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from\_ts=1614802054474&live=true&to\_ts=1615406854474&tpl\_var\_network=mainnet](https://p.datadoghq.com/sb/e72980047-41e546b0c453a72015620c4d8002646b?from_ts=1614802054474&live=true&to_ts=1615406854474&tpl_var_network=mainnet)
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