The MakerDAO community voted in favor of a temporary increase to the interest rate paid to holders of the protocol’s decentralized stablecoin DAI.
After the conclusion of a governance vote on July 27, the protocol enacted the proposal which introduced the Enhanced Dai Savings Rate (EDSR) – a system to temporarily increase the DAI Savings Rate (DSR) to users when the utilization is low.
The proposal, put forward by Maker founder Rune Christensen, could make the effective DSR as high as 8% when utilization ranges from 0% to 20%. The mechanism is designed such that, as utilization increases, the DSR gradually decreases over time.
Maker has increased the DSR thrice over the last few months, first raising it to 1% in November, then to 3.3% in May, and finally, incorporating a marginal increase to 3.49% in June.
However, data from Dai Stats shows that investors have deposited just $307 million in the DSR, which accounts for 6.7% of the total supply. The amount of DAI in circulation has also fallen to $4.6 billion from over $6.9 billion last year.
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
“After setting the DSR to among the highest values in DeFi, we have managed to somewhat stabilize the total Dai supply, but we have not yet managed to generate sustainable growth in new demand and capital inflows,” wrote Christensen in Maker’s governance forum.
“The EDSR helps fix this by ensuring that Dai holders that are pioneering the adoption of DSR get a more fair amount of value from the increased returns generated by the protocol. In turn this might help spur adoption, and perhaps push other DeFi protocols to quickly integrate the DSR while the EDSR is active,” he added.
