Growth of MakerDAO Tokens Differs; sDAI Rises But DAI Declines
Mr. Pratik chadhokar is an Indian Forex, Cryptocurrencies and Financial Market Advisor and analyst with a background in IT and Financial market Strategist. He specialises in market strategies and technical analysis and has spent over a year as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the Financial markets.
The decentralized finance space is still in its infancy and is difficult to predict. Tokens within the same protocol can perform differently possibly since they cater to different sets of users. Crypto assets belonging to one of the prominent decentralized autonomous organizations (DAO), MakerDAO, for instance, are taking different paths in terms of growth.
Decentralized stablecoin from MakerDAO, which is the yield-bearing version, Savings DAI, was recently reported to hit a total value locked worth $1 Billion.
In a recent announcement from SparkDAO, a lending market built on the DAI stablecoin and the inaugural subDAO of MakerDAO, it has been revealed that sDAI tokens can generate interest through the DAI Savings Rate (DSR). Notably, the yields from sDAI are intentionally structured to diminish as the adoption of the platform expands.
SparkDAO holds the responsibility for governing the protocol governing Savings DAI, marking an intriguing development within the decentralized finance (DeFi) ecosystem.
Though the interest rate saw an uptick, the market capitalization of DAI has experienced a significant decline. It plummeted by 47% from its peak in February 2022 to a current valuation of $5.35 billion. The downturn in market cap shows that a substantial portion of sDAI holders may consist of existing DAI holders, rather than an influx of new users.
Furthermore, the circulating supply of DAI has contracted by 13.6% during a similar time frame. Thus, indicating a reduction in the number of DAI tokens available in the market. These trends underscore the complex dynamics at play within the DAI ecosystem and may warrant further examination to understand the underlying factors contributing to these developments.
Despite the challenging market conditions, Maker and Spark have witnessed remarkable growth and garnered substantial attention within the DeFi community. Sam MacPherson, the CEO of Phoenix Labs, the team responsible for developing Spark Protocol, has noted this promising trend.
It underscores that despite the broader market fluctuations, these projects have managed to capture the interest and confidence of participants in the decentralized finance space, pointing to their resilience and potential for further expansion.
As of the latest available data, Spark Protocol boasts an impressive total value locked (TVL) of $440 Million. This achievement positions Spark Protocol as the fifth-largest DeFi protocol in terms of TVL, according to DeFi Llama’s data. The notable TVL underscores the platform’s growing influence and success within the decentralized finance (DeFi) ecosystem, solidifying its presence among the top players in the space.
In a proactive move aimed at stimulating DAI adoption and counteracting the decline in its market capitalization, MakerDAO implemented an increase in DSR (Dai Savings Rate) yields. This adjustment raised the DSR to 8% in early August, marking a significant jump from the previous increase that took it from 1% to 3.3% in May.
These successive hikes in DSR yields are part of MakerDAO’s strategic efforts to incentivize DAI holders and attract new users, bolstering its position within the decentralized finance (DeFi) landscape.
The rate hike in DSR yields had a swift impact on the adoption of Spark Protocol and sDAI. Interestingly, Rune Christensen, the founder of MakerDAO, proposed a recommendation to cap DSR yields at 5% just 48 hours after increasing the returns.
Despite this development, data from Dune Analytics reveals substantial growth in the total value locked (TVL) within Maker’s DSR, reaching $1.65 Billion. This represents an impressive surge of 1,170% since June 19.
