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MakerDAO proposal seeks to increase DAI savings rate to 3.33%
The community of Ethereum-based decentralized finance (DeFi) protocol MakerDAO will soon vote on a proposal to increase the Dai stablecoin (DAI) savings rate (DSR) to 3.33%. If it all goes through, the move is tipped to have wider implications for rates in DeFi.
In a May 26 tweet, the Maker team revealed that an “upcoming Executive Vote will implement another DSR increase, from 1% to 3.33%, if approved.”
“The Dai Savings Rate (DSR) is a fundamental part of the Maker Protocol system and allows users to deposit DAI and receive consistent interest. This interest is accrued in real time from the revenue generated by the system,” said Maker.
The proposal was submitted by DeFi-focused risk management firm Block Analytica and submitted by a member of MakeDAO’s core risk team.
Brace yourself, DAI holders, for a DSR of 3.33%.
An upcoming Executive Vote will implement another DSR increase, from 1% to 3.33%, if approved.
This change was made by @BlockAnalitica and submitted via the last parameter changes in the stability range.
— Maker (@MakerDAO) May 26, 2023
The DSR refers to the interest rate that users generate by locking their DAI into MakerDAO’s smart DSR contracts.
The DSR is funded from the stability fees users pay for borrowing DAI against collateralized assets such as Ether (ETH) and Wrapped BTC (WBTC), and the latter proposal also seeks to adjust some stability fees on certain types of collateral.
According to an August 2018 MakerDAO blog post, the DSR is an important financial lever that helps “balance DAI supply and demand” by incentivizing or discouraging users from committing DAI to DSR contracts.
“It is a global parameter that often needs to be adjusted to address short-term changes in the market conditions of the Dai economy,” said MakerDAO.
is part of the stability range – dsr is benchmarked vs tbills and average earnings earned on psms
guess the logic is that eventually the market will become more efficient, it’s better to be a first mover
— monetsupply.eth (@MonetSupply) May 26, 2023
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Primoz Kordez, founder of Block Analitica, added more context to the proposal, telling the community to prepare for [a] rate hike in DeFi.”
“New proposal at MakerDAO will increase DAI DSR to 3.33%, driving rates higher across the DeFi landscape. Please note that DAI in DSR is the benchmark for [the] safest DeFi stablecoin yield.”
“Stablecoin suppliers at Aave and Compound are earning around 2%-2.5% and a decent amount of capital should flow into DAI DSR to bring supply rates to a range of 3.5%+,” he added.
Now you see how systemically important MakerDAO is.
— Primoz Kordez (@PrimozKordez) May 26, 2023
Before this latest DSR proposal, the rate was increased to 1% in December 2022 after the community voted to do so. In February, MakerDAO claimed the move resulted in 35 million DAI being poured into DSR contracts in a month.
Increasing the DSR to 1% led to more than 35 million DAI being deposited in a month.
The DSR is a Maker Protocol module that plugs into any other DeFi tool, extending the basic efficiency of DeFi to a wider range of users.
How can a DeFi protocol connect to the DSR? ↓ pic.twitter.com/vXwcKFCuP6
— Maker (@MakerDAO) February 2, 2023
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