The Ethereum-based decentralized finance (DeFi) community MakerDAO protocol will soon vote on a proposal that seeks to increase the stablecoin Dai (DAY) savings rate (DSR) at 3.33%. If all goes through, the move is anticipated to have broader implications for rates across all DeFi.
In a May 26 tweet, the Maker team revealed that an โupcoming executive vote will implement a new DSR increase, from 1% to 3.33%, if approved.โ
โThe Dai Savings Rate (DSR) is a fundamental component within the Maker Protocol system, offering users the opportunity to deposit DAI and receive a constant interest rate. This interest accrues in real time, accruing from system revenue,โ Maker said.
He proposal was hosted by DeFi-focused risk management firm Block Analitica, and presented by a member of the MakeDAO core risk unit team.
Brace yourself, DAI holders, for a 3.33% DSR.
An upcoming executive vote will implement a new DSR increase, from 1% to 3.33%, if approved.
This change was proposed by @BlockAnalytic and sent via the latest stability scope parameter changes.
โ https://t.co/loPFBtqjAq pic.twitter.com/zRlPQQj3ze
โ Creator (@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 financed with stability fees that users pay to borrow DAI against collateralized assets like Ether (ETH) and Wrapped BTC (WBTC), with the latter proposal also looking to adjust a number of stability fees on certain types of guarantees also.
According to an August 2018 MakerDAO blog post, the DSR is a key monetary lever that aid โbalancing the supply and demand of DAIโ by incentivizing or disincentivizing users to lock up DAI in DSR contracts.
โIt is a global parameter that needs to be adjusted frequently to cope with short-term changes in the market conditions of the Dai economy,โ MakerDAO says.
it is part of the scope of stability: dsr is compared to tbills and average revenue earned in pms
I think the logic is that the market will become more efficient eventually, better to be the first to move
โmonetsupply.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 DeFiโ.
โThe new proposal in MakerDAO will increase the DAI DSR to 3.33%, which will set higher rates across the DeFi landscape. Please note that DAI in DSR is the benchmark for [the] the most secure DeFi stablecoin yield.โ
โStablecoin 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 the 3.5++ range,โ he added.
Now you see how important MakerDAO is from a systemic point of view.
โ 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 to do so. In February, MakerDAO claimed that the move led to 35 million DAI being deposited in 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 DeFi benchmark performance to a broader group of users.
How can a DeFi protocol be connected to the DSR? โ pic.twitter.com/vXwcKFCuP6
โ Creator (@MakerDAO) February 2, 2023
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