MakerDAO Boosts Dai Holders’ Yields with EDSR

On July 27, the MakerDAO community approved a proposal to temporarily enhance the interest rate granted to holders of the stablecoin Dai, increasing tokenholder yields to as much as 8%.

The proposal introduced the Enhanced Dai Savings Rate (EDSR), a mechanism that momentarily increases the available Dai Savings Rate (DSR).

The utilization of the DSR will determine the enhanced mechanism, which will decrease over time as the DSR utilization increases.

“The EDSR assists in resolving this issue by ensuring that Dai holders receive a more equitable proportion of the increased returns generated by the protocol.

According to MakerDAO co-founder Rune Christensen’s proposition, this could, in turn, spur adoption.

He noted that despite offering a higher yield, the DSR’s portfolio strategy of 75% allocated to actual assets and 15% in custody with Coinbase still generates a high spread.

In June, MakerDAO increased its DSR to 3.49 percent to make DAI more competitive.

Despite the endeavor, less than 7% of the total DAI supply was deposited in the DSR.

The proposal states, “In practice, however, DSR utilization is close to zero, giving us excessive margins and a huge windfall of surplus on top of what we ordinarily earn with the protocol at this size.”

“Our actual income is significantly greater than what is displayed on, for example, Makerburn.”

The new yield aims to increase DAI adoption amidst a global decline in stablecoin market valuation.

According to CoinMarketCap, DAI is presently ranked third among stablecoins, with a market capitalization of $4.5 billion at the time of writing, compared to $8.6 billion in 2022.

The DAI stablecoin ranks third, behind Tether and USD Coin, which have respective market capitalizations of $83.7 billion and $26.5 billion.

MakerDAO has taken several steps to maintain its competitiveness amidst market volatility.

To strengthen its portfolio, the protocol increased its holdings of U.S. Treasury bonds by 150% to $1.25 billion in March.