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What Is the Function of a Stability Fee in a Decentralized Stablecoin System?

An interest rate on minted stablecoins used as a monetary tool to manage supply and demand and maintain the price peg.
Greeks.Live21.11.25

What Is the Function of a Stability Fee in a Decentralized Stablecoin System?

The stability fee is an annual percentage rate charged to users who mint the stablecoin by locking collateral in a CDP. Its primary function is to act as a monetary policy tool to manage the stablecoin's peg.

If the stablecoin trades below its peg, the fee can be raised to discourage borrowing and encourage repayment, reducing supply. If it trades above, the fee can be lowered to incentivize minting, increasing supply.

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