Home CryptocurrencyAltcoin MakerDAO’s proposal seeks to increase the DAI savings rate to 3.33%

MakerDAO’s proposal seeks to increase the DAI savings rate to 3.33%

by SuperiorInvest

Ethereum-based decentralized finance (DeFi) community the MakerDAO protocol will soon vote on a proposal to raise the Dai stablecoin (DAI) savings rate (DSR) to 3.33%. If all goes well, the move is expected to have a wider impact on DeFi rates.

In a May 26 tweet, the Maker team revealed that “the upcoming executive vote will deploy a new DSR increase from 1% to 3.33% if approved.”

“The Dai Savings Rate (DSR) is a core component of the Maker Protocol system that offers users the ability to deposit DAI and receive a consistent interest rate. This interest is charged in real-time and accrues from the system’s earnings,” Maker said.

The proposal was submitted by DeFi-focused risk management company Block Analytica and submitted by a member of the MakeDAO Risk Core Team.

DSR refers to the interest rate users receive for locking their DAI into MakerDAO’s DSR smart contracts.

DSR is financed by stability fees that users pay to borrow DAI against collateralized assets such as Ether (ETH) and Wrapped BTC (WBTC) and this latest proposal also seeks to adjust a number of stability fees to certain types of collateral also.

According to MakerDAO’s August 2018 blog post, DSR is the key monetary lever that it helps “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 frequently to cope with short-term changes in market conditions of the Dai economy,” according to MakerDAO.

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Block Analitica founder Primoz Kordez added more context to the proposal, telling the community to “get ready for [a] raising rates in DeFi.”

“The new proposal on MakerDAO will increase the DAI DSR to 3.33%, which will increase rates throughout the DeFi landscape. Note that DAI in DSR is a measure of [the] the safest DeFi stablecoin yield.”

“Stablecoin suppliers at Aave and Compound are earning around 2% to 2.5% and there should be a decent amount of capital flowing into DAI DSR to push the supply rate to 3.5%+,” he added.

Prior to this latest DSR proposal, there was a rate increased to 1% in December 2022 after the community voted for it. In February, MakerDAO claimed that the move resulted in 35 million DAI being deposited into DSR contracts during the month.

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