Interest should be automatically calculated based on how far away from peg it is. Dao votes to increase and decrease the interest arnt fast enough to react to changes
If the peg is maintained correctly there should be little or no interest. The current system disincentivises protocol use
You are incentivising providing liquidity but disincentivising creating iassets to provide liquidity.
From the start it should have been an easy relationship of cdp owners maintaining the peg to reduce interest rates and when they weren’t doing their job the protocol should use the interest earned to buy back iassets to correct peg (first redeeming lower colateralised cdps and going up if necessary to the not normally redeemedable cdps as it is all their responsibility to maintain the peg). This would allow for a repeg even when there are no redeemedable cdps.