MakerDAO Votes on Increasing DSR to 3.33%

MakerDAO’s community will soon vote on a proposal to increase the savings rate (DSR) of its Dai (DAI) stablecoin to 3.33 percent.

If implemented, the change is anticipated to have far-reaching effects on rates across the DeFi market.

The Maker team announced in a tweet on May 26 that “if approved, an upcoming executive vote will implement a new DSR raise from 1% to 3.33 percent.”

“The Dai Savings Rate (DSR) is an integral part of the Maker Protocol system, allowing users to deposit DAI and earn a consistent interest rate.

This interest accrues in real-time from the system’s revenues, as stated by Maker.

The proposal was presented by Block Analitica, a DeFi-focused risk management firm, and submitted by a MakerDAO risk core unit team member.

The DSR is the interest rate accrued by users who lock their DAI into MakerDAO’s DSR intelligent contracts.

The DSR is financed by users’ stability fees when borrowing DAI against collateralized assets, such as Ether and Wrapped Bitcoin (WBTC).

This latest proposal aims to adjust several stability fees for specific collateral types.

According to an August 2018 MakerDAO blog post, the DSR is a crucial monetary lever that helps “balance the supply and demand of DAI” by incentivizing or disincentivizing users to lock up DAI in DSR contracts.

MakerDAO states, “It is a global parameter that must be adjusted frequently to account for short-term changes in the DAI economy’s market conditions.”

Primoz Kordez, the founder of Block Analitica, added context to the proposal by advising the community to “prepare for a rate increase in DeFi.”

“New proposal at MakerDAO will increase DAI DSR to 3.33% which will set rates higher across the DeFi landscape. Keep in mind DAI in DSR is the benchmark for [the] safest DeFi stablecoin yield.”

“Stablecoin suppliers at Aave and Compound earn between 2% and 2.5%, and a substantial amount of capital should flow into DAI DSR to increase supply rates to a range of 3.5% and above,” he added.

Before this most recent DSR proposal, the rate was raised to 1% in December 2022 following a community vote in favor of the increase.

In February, MakerDAO stated that the move resulted in the deposit of 35 million DAI into DSR contracts within a month.