MakerDAO proposal is currently under consideration by the MakerDAO community, which consists of Ethereum-based decentralized finance (DeFi) protocol users. This proposal aims to raise the savings rate (DSR) of the stablecoin Dai (DAI) to 3.33%. If approved, this adjustment is expected to have significant effects on interest rates throughout the DeFi market.
MakerDAO proposal seeks to hike DAI savings rate to 3.33%
MakerDAO’s community, a decentralized finance (DeFi) protocol based on Ethereum, is preparing to vote on a proposal that aims to increase the savings rate (DSR) of its stablecoin Dai (DAI) to 3.33%. If the proposal is approved, it is expected to have a significant impact on interest rates across the entire DeFi market.
In a tweet on May 26, the Maker team disclosed that an upcoming Executive Vote would implement a new DSR raise, taking it from 1% to 3.33%, pending approval.
The Dai Savings Rate (DSR) plays a crucial role in the Maker Protocol system, providing users with the opportunity to deposit DAI and earn a consistent interest rate. This interest is continuously accrued in real-time, accumulating from the system’s revenues, as explained by Maker.
The proposal was introduced by Block Analitica, a risk management firm focused on DeFi, and submitted by a member of MakerDAO’s risk core unit team.
The DSR, which stands for Dai Savings Rate, represents the interest rate that users earn when they lock their DAI into the smart contracts of MakerDAO.
Funding for the DSR is derived from stability fees paid by users who borrow DAI against collateralized assets like Ether and Wrapped Bitcoin (WBTC). In addition to the proposed DSR adjustment, this latest proposal also aims to modify stability fees associated with specific types of collateral.
According to a blog post by MakerDAO in August 2018, the DSR serves as a crucial monetary tool for maintaining a balance between the supply and demand of DAI. It accomplishes this by incentivizing or disincentivizing users to lock their 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.
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.
Following a community vote that favored the increase, the DSR rate experienced a surge to 1% in December 2022. Subsequently, in February, MakerDAO reported that this adjustment resulted in a significant influx of 35 million DAI being deposited into DSR contracts within a month.
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