MakerDAO, the decentralized autonomous organization behind DAI stablecoin, has approved a proposal to temporarily increase interest rates for DAI token holders, introducing the Enhanced Dai Savings Rate (EDSR) to bolster competitiveness during market turbulence. The EDSR will offer users higher yields of up to 8%.
The decision to introduce EDSR was driven by the underutilization of the DAI Savings Rate (DSR), set at 3.49% in June, with less than 7% of total DAI supply being deposited, resulting in excess income for the protocol.
The EDSR mechanism will be responsive to market conditions and user demand, with the enhanced yield gradually decreasing as DSR utilization increases. This move is expected to drive DAI adoption and attract more users to the ecosystem.
Challenges in increasing DSR utilization lie in MakerDAO’s portfolio strategy, allocating 75% to real-world assets and 15% in Coinbase custody, causing a high spread between yield and the strategy.
1/ Is it do or $DAI for @MakerDAO?
It's been a series of unfortunate events for stablecoins so far this year. $DAI has struggled to gain market traction, currently holding 3% among all stablecoins.@kunalgoel dives into insights & implications below. 🧵 pic.twitter.com/0br0M9M2UH
— Messari (@MessariCrypto) July 26, 2023
Rune Christensen, co-founder of MakerDAO, stressed the EDSR’s significance in ensuring DAI holders benefit from increased returns. Amidst a global stablecoin market slump, DAI’s market cap decreased from $8.6 billion to $4.5 billion. To maintain competitiveness, MakerDAO increased U.S. Treasury bond holdings to $1.25 billion in March.
The implementation of the EDSR is a significant step towards solidifying MakerDAO’s position in the decentralized finance space, showcasing their commitment to innovation and user-centric approaches.
