Major DeFi protocol MakerDAO’s community is currently voting to increase the savings rate for its stablecoin DAI.
A polling contract posted on Nov. 28 asked the community to vote on increasing the DAI Savings Rate (DSR) to either 0.25%, 0.50%, 0.75%, 1% or leave it unchanged at 0.01%. At the time of writing, the leading option was to increase the DSR to 1% with 18,216 MKR votes cast unanimously in favor.
Increasing the DSR to 1% would cost Maker 12,000 DAI per year, assuming no increase in deposits, based on the protocol’s initial estimates.
“With rapidly changing rate conditions in the traditional finance space, MakerDAO can consider making adjustments to the DAI savings rate (DSR),” said risk management unit Monet Supply in the governance forum.
Maker can afford to do this because of “several new sources of revenue coming online,” explained Monet Supply. These new revenue sources include the revenue sharing agreement from Gemini’s GUSD in its Peg Stability Module (PSM), Monetalis’ short-term bonds and Coinbase-related revenue opportunities.
These opportunities could allow Maker to significantly increase protocol revenue enough to come out ahead even taking into account an increase in cost of capital due to raising the DSR, said Monet Supply.
Interestingly, the Maker community has just turned down another potential revenue opportunity from CoinShares. The company proposed managing between $100 million to $500 million USDC to invest in bonds with a yield that matches the Secured Overnight Financing Rate (SOFR) which currently stands at 3.8%. The Maker community rejected CoinShares Treasury management proposal, with 72% of voters against it.
Monet Supply expects that increasing DSR could incentivize users to keep their capital in DeFi even in an environment of increasing risk-free rates that makes traditional financial instruments like Treasury Bills more appealing. The user retention would increase DAI supply and enhance Maker’s liquidity position.