Double-Digit Rates in DeFi Not So Far Anymore

Hello defiers! Here’s what’s going on in decentralized finance,

• Dai deposit rate is likely increasing to 7.75 percent from 6 percent
• Set Protocol launched Social Trading, where anyone can automatically copy individual investors’ strategies
• DeFi and NFTs are merging in a new undercollateralized loan experiments

and more :)

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MakerDAO is Getting Close to Double-Digit Deposit Rates

Holding Dai tokens, which are pegged at one-to-one to the dollar, might soon get you as high as 7.75 percent of interest — that’s about four times more what you can get for dollars in a U.S. bank account.

Holders of MakerDAO’s MKR token are in the process of voting for new interest rates, which will determine the Dai Savings Rate, or the rate Dai holders pay for keeping their stablecoins in a MakerDAO smart contract.

Image source: MakerDAO Governance Dashboard

Unlike past votes where token holders decided on the DSR directly, this time they’ll vote on the Dai Stability Fee (equivalent to Dai borrowing costs) and the Dai Savings Rate Spread, or the difference between the Stability Fee and the Savings Rate.

The change was voted on recently to make sure that MakerDAO’s deposit and lending rates are always tied, with DSR always lower than the Stability Fee. So now the formula is: Dai Savings Rate = Dai Stability Fee - Dai Savings Rate Spread.

Image source: MakerDAO Blog

What’s being voted on right now is a stability fee in the range of 10 percent to 2 percent, and a spread to DSR in the range of 4 percent to 0.25 percent. If the highest stability fee and lowest spread gets approved, then DeFi users would get a Dai deposit rate of 9.75 percent but what’s attracting most votes right now is 8 percent stability fee (62.45% of MKR) and 0.25 percent spread with DSR (99.46%). That means DSR will likely increase to 7.75 percent from 6 percent currently

A rate increase is due as Dai supply is increasing, breaching the 100 million mark yesterday, and that’s causing the peg to slide below $1.

If the highest DSR is approved, we wouldn’t be so far from double-digit savings rates in DeFi. And with MakerDAO acting as the DeFI central bank, rates in other lending platforms would follow.

The Follow Button is Being Supercharged With Money

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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively cove