MakerDAO proposal eyes new DAI savings rate of 3.33%

• MakerDAO is considering a proposal to raise the Dai savings rate (DSR).
• This follows the last change that saw DSR increase to 1%, attracting over 35 million DAI deposits in a month.
• If approved, the latest proposal would see the DAI savings rate increase from the current rate to 3.33%.

MakerDAO, the decentralized finance (DeFi) protocol that issues the DAI stablecoin, has proposed an increase of the Dai savings rate (DSR) to 3.33%. 

The proposal comes a few months after a vote to raise the DSR to 1% from 0.6% saw over $35 million worth of the stablecoin deposited within a month. The latest change was put forward by DeFi platform Block Analitica and is subject to an Executive Vote by MKR holders. 

MKR is the governance token of the Maker lending protocol.

“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,” the protocol said.

Implications for the broader DeFi ecosystem

As noted, the DSR plays a key role in MakerDAO’s monetary policy. Other than allowing platform users to earn interest on their DAI deposits, it helps in ecosystem growth with the community incentivized to mint new DAI.

The proposal to increase the DSR comes at a time when interest rates are rising in the traditional financial system.

For instance, the US Federal Reserve has raised interest rates several times in recent months as it looked to combat inflation. The change in the Dai rate also comes as yields on the US Treasury bonds spike, with the 3-month yield at around 5.29%.

Industry experts and observers say MakerDAO’s move could have broader implications for the wider DeFi market.

Primoz Kordez, the founder of Block Analitica, said raising Dai DSR to the proposed 3.33% will have ramifications across the sector as its DSR is the “benchmark for safest DeFi stablecoin yield.”

Dai rate has been low compared to other platforms such as Compound and Aave that currently offer up to 2.5% in rates for the likes of USDT, USDC and DAI. The industry should therefore brace itself for higher rates across lending protocols, stablecoins, bridges and DeFi treasuries, according to one expert.