Exploring MakerDAO’s Proposal to Increase DAI Savings Rate: Implications for DeFi Landscape

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The Ethereum-based decentralized finance (DeFi) protocol, MakerDAO’s community, is gearing up to vote on a proposal to increase the Dai stablecoin (DAI) savings rate (DSR) to 3.33%. If approved, this move may have broader implications for rates across DeFi.

The DAI savings rate is a fundamental component within the Maker Protocol system, offering users the opportunity to deposit DAI and receive a consistent interest rate. This interest rate is accrued in real-time, accumulating from the system’s revenues. The latest proposal, made by Block Analitica, seeks to adjust a number of stability fees on certain collateral types along with the DSR increase.

The DAI savings rate refers to the interest rate that users accrue from locking their DAI into MakerDAO’s DSR smart contracts. This move is intended to help balance the demand and supply of DAI by incentivizing or disincentivizing users to lock up their DAI in DSR contracts. This global parameter needs regular adjustments to deal with short-term changes in market conditions of the DAI economy.

Block Analitica founder Primoz Kordez has noted that the proposed increase of the DAI DSR will set rates higher across the DeFi landscape. If the proposal is approved, stablecoin suppliers at platforms such as Aave and Compound could earn around 2%-2.5%. A significant amount of capital is expected to flow to the DAI DSR, pushing supply rates to the range of 3.5% or above.

This vote comes after the DAI savings rate was previously increased to 1% in December 2022, as a result of community approval. MakerDAO announced that this increase in February led to 35 million DAI being deposited into DSR contracts within a month.

Considering both the potential impact on DeFi landscape and potential capital flows, the outcomes of this proposal vote are bound to be highly anticipated by the market participants.

Source: Cointelegraph

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