The Ethereum-based decentralized finance (DeFi) protocol community MakerDAO will soon vote on a proposal to increase the save rate of its Dai stablecoin (ICD) to 3.33%. If approved, the move could have broader implications for interest rates across the DeFi market.
In a May 26 tweet, the Maker team revealed that an “upcoming executive vote will roll out a new DSR hike, from 1% to 3.33%, if approved.”
“The Dai saving rate (DSR) is a fundamental component within the Maker Protocol system, which offers users the opportunity to deposit DAI and receive a constant interest rate. This interest accrues in real time, accruing from the revenue from the system,” Maker said.
The proposal was brought to you by DeFi-focused risk management firm Block Analitica and presented by a team member from MakerDAO’s central risk unit.
Brace yourself, DAI holders, for a DSR at 3.33%.
An upcoming Executive Vote will deploy a new DSR raise, from 1% to 3.33%, if approved.
This change was put forth by @BlockAnalitica and submitted via the latest Stability Scope Parameter Changes.
—Maker (@MakerDAO) May 26, 2023
DSR refers to the interest rate that users earn by locking their DAI into MakerDAO’s DSR smart contracts.
The DSR is funded by the stability fees users pay for borrowing DAI against collateralized assets, such as Ether (ETH) and Wrapped Bitcoin (WBTC), with the latter proposal also seeking to adjust various stability fees on certain types of collateralized assets.
According to an August 2018 MakerDAO blog post, the DSR is a key monetary lever that aid to “balance the supply and demand of DAI” by incentivizing or disincentivizing users to lock DAI in DSR contracts.
“It is a global parameter that needs to be adjusted often to cope with short-term changes in the market conditions of the DAI economy,” MakerDAO says.
is part of the stability scope- dsr is benchmarked vs tbills and avg revenue earned on psms
think the logic is market will grow more efficient eventually, better to be a first mover
—monetsupply.eth (@MonetSupply) May 26, 2023
Adding more context to the proposal, Block Analitica founder Primoz Kordez told the community to “prepare for a DeFi rate hike.”
“The new proposal in MakerDAO will increase DAI DSR to 3.33%, which will set rates higher across the DeFi landscape. Keep in mind that DAI in DSR is the benchmark for the safest stablecoin performance in DeFi.”
“Stablecoin providers in Aave and Compound earn around 2-2.5% and a decent amount of capital should flow into the DAI DSR to push supply rates into a higher 3.5% range,” he added.
Now you see how systemically important MakerDAO is.
— Primoz Kordez (@PrimozKordez) May 26, 2023
Prior to this latest DSR proposal, the rate was increase to 1% in December 2022 after the community voted in favor of the increase. In February, MakerDAO claimed that the move caused 35 million DAI to be deposited in DSR contracts in one month.
Raising the DSR to 1% led to more than 35 million DAI being deposited in a month.
The DSR is a Maker Protocol module that can be plugged into any other DeFi tool, extending the baseline yield of DeFi to a broader group of users.
How can a DeFi protocol connect to the DSR? ↓ pic.twitter.com/vXwcKFCuP6
—Maker (@MakerDAO) February 2, 2023
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