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MakerDAO Proposes Raising The DAI Savings Rate By 3.3%

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MakerDAO Proposes Raising The DAI Savings Rate By 3.3%
MakerDAO Proposes Raising The DAI Savings Rate By 3.3%

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One of the core developers at the MakerDAO decentralized platform has proposed raising the savings rate for the DAI stablecoin.

DAI is one of the largest and most popular collateral-backed stablecoins in the cryptocurrency sector.

MakerDAO wants to increase the DAI savings rate to 3.3%

The increased interest rates for the DAI stablecoin come amid increased interest rates in the traditional finance industry.

The US Federal Reserve and other central banks globally have been raising interest rates to tame inflation levels, which has, in turn, increased the cost of borrowing.

MakerDAO published an update on Twitter on the possibility of raising interest rates:

The Twitter post said that DAI holders needed to be ready to have the savings rate increased to 3.3%. In the Twitter post, MakerDAO said that the proposal for the rate hike was tabled by Block Analitica, a DeFi risk management platform.

MakerDAO stated that 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 rate is accrued in real time, accumulating from the system’s revenues.

MakerDAO also said that the DAI Savings Rate could be adjusted as often as possible to deal with short-term changes in the market conditions within the DAI economy.

The DAI Savings Rate is funded using the Stability Fee on the network, and it can be paid when the DAI stablecoin is locked within a DSR contract.

It is not the first time that DSR is raising the savings rate. Last year, the protocol increased the DSR to 1%. The action resulted in over 35 million DAI tokens being deposited on the platform within one month, according to the protocol.

The proposal has also referred to the current yield on a 3-month Treasury Bill, which sits at around 5.29%.

The proposal will have to be voted upon by the decentralized autonomous organization before it is passed and the rates increase. The proposal has also mentioned that the average yields for the other cash stablecoins that have been mentioned are at 0.97%.

MakerDAO member says the proposal will be a huge tailwind for DeFi

One of the MakerDAO community members from Block Analitica, known as Monet Supply, has said that the hike in savings rate could be a “huge tailwind” for the entire DeFi sector.

The community member further said that the move could increase the DAI in circulation, which will, in turn, boost market efficiency.

The co-founder of Phoenix Labs, Sam MacPherson, has also applauded the move saying that the savings rate will boost demand for the DAO stablecoin, which will in turn, increase the market cap.

The move will also increase the borrowing rates at top DeFi lending platforms as MakerDAO will have increased the cost of capital.

The proposal will raise rates across the entire DeFi ecosystem, given that MakerDAO is one of the oldest DeFi protocols. The protocol is usually used as a benchmark for the safest DeFi stablecoin yield.


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