MakerDAO Jacks DAI Savings Rate To 8% For Spark Protocol Users

DSR yields will progressively fall as adoption rises.

By: Samuel Haig Loading...

MakerDAO Jacks DAI Savings Rate To 8% For Spark Protocol Users

Investors holding MakerDAO’s DAI stablecoin can now access yields of as high as 8% using its recently-launched sister project, Spark Protocol.

Rune Christensen, MakerDAO’s founder, announced the news via tweet on August 6.

“DAI Savings Rate is now live paying out 8% at no additional risk compared to holding DAI,” Christensen said. “The rate is so high because there are currently not that many people using the DAI Savings Rate - only about 9% of DAI holders use DSR currently.”

Christensen noted Maker’s Enhanced DSR system activates to increase the DSR rate when adoption is low. “Once more users arrive, the rate will go back down,” he added.

The news comes as Maker is vying to protect its stake in the rapidly evolving stablecoin ecosystem.

With prominent Maker community members recently launching Spark Protocol, a DAI-focussed lending protocol, plus confidence in Curve and its new crvUSD stablecoin rattled by last week’s exploit targeting the Vyper smart contract language, Maker believes now is the perfect time to entice users with high DSR yields.

Christensen said VPN or U.S.-based holders cannot access the DSR rate. However, Twitter user, tmnxeq, begged to differ regarding VPN users.

DAI Supply Wanes

DAI’s market cap has since fallen 43% from $7B to $4B in the past 12 months, with many investors moving to unload exposure to the token after it de-pegged alongside USDC in March.

Investors feared USDC’s reserves could be impacted when some of its banking partners entered insolvency, and with more than 40% of DAI’s collateral then comprising USDC, both tokens briefly crashed below $0.90.

USDC’s supply is also down more than half since tagging $54B last May, currently sitting at $26M.

Enticing Users

MakerDAO has progressively increased the rates offered by its DSR in a bid to entice users and shore up its stablecoin market share.

In May, the MakerDAO community passed a governance proposal to raise the DSR rate from 1% to 3.3%, before backing Christensen’s recommendation to further raise it to 8% last month.

The rate will only remain at 8% while utilization is below 20%, with the interest offered progressively declining as utilization increases.

For comparison, Aave v3, the leading web3 lending protocol by total value locked, is currently offering a 2.8% APY on DAI deposits.

The news also comes as MakerDAO is embarking on its controversial “Endgame” roadmap. The plan seeks to restructure MakerDAO’s into a series of subDAOs, each of which will oversee distinct aspects of Maker’s operations and have their own governance process.

Spark Protocol plans to become a subDAO in the future.