MakerDAO proposal seeks to hike DAI savings rate to 3.33%

The com­mu­ni­ty of Ethereum-based decen­tral­ized finance (DeFi) pro­to­col Mak­er­DAO will soon vote on a pro­pos­al seek­ing to increase the Dai sta­ble­coin (DAI) sav­ings rate (DSR) to 3.33%. If it all goes through, the move is tipped to have broad­er impli­ca­tions for rates across DeFi.

In a May 26 tweet, the Mak­er team revealed that an “upcom­ing Exec­u­tive Vote will deploy a new DSR raise, from 1% to 3.33%, if approved.”

“The Dai Sav­ings Rate (DSR) is a fun­da­men­tal com­po­nent with­in the Mak­er Pro­to­col sys­tem, offer­ing users the oppor­tu­ni­ty to deposit DAI and receive a con­sis­tent inter­est rate. This inter­est is accrued in real-time, accu­mu­lat­ing from the sys­tem’s rev­enues,” Mak­er stated. 

The pro­pos­al was put for­ward by DeFi-focused risk man­age­ment firm Block Ana­lit­i­ca, and sub­mit­ted by a mem­ber of MakeDAO’s risk core unit team. 

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.

→ https://t.co/loPFBtqjAq pic.twitter.com/zRlPQQj3ze

— Mak­er (@MakerDAO) May 26, 2023

The DSR refers to the inter­est rate that users accrue from lock­ing their DAI into MakerDAO’s DSR smart contracts.

The DSR is fund­ed from the sta­bil­i­ty fees that users pay for bor­row­ing DAI against col­lat­er­al­ized assets such as Ether (ETH) and Wrapped BTC (WBTC), and this lat­est pro­pos­al is also seek­ing to adjust a num­ber of sta­bil­i­ty fees on cer­tain col­lat­er­al types as well. 

As per a Mak­er­DAO blog post from August 2018, the DSR is a key mon­e­tary lever that helps “bal­ance sup­ply and demand of DAI” by incen­tiviz­ing or dis­in­cen­tiviz­ing users to lock up DAI in DSR contracts. 

“It is a glob­al para­me­ter that needs to be adjust­ed often to deal with short-term changes in mar­ket con­di­tions of the Dai econ­o­my,” Mak­er­DAO states. 

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

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Adding more con­text to the pro­pos­al, Block Ana­lit­i­ca founder Pri­moz Kordez told the com­mu­ni­ty to “pre­pare for [a] rate hike in DeFi.”

“New pro­pos­al at Mak­er­DAO will increase DAI DSR to 3.33% which will set rates high­er across the DeFi land­scape. Keep in mind DAI in DSR is the bench­mark for [the] safest DeFi sta­ble­coin yield.” 

“Sta­ble­coin sup­pli­ers at Aave and Com­pound earn around 2%-2.5% and a decent amount of cap­i­tal should flow to DAI DSR to push 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 in favor of doing so. In Feb­ru­ary, Mak­er­DAO claimed the move led to 35 mil­lion DAI being deposit­ed into DSR con­tracts in the space of a 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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