A proposition to ensure short-term enhancement in interest rate given to stablecoin Dai users was authorised by MakerDAO community on July 27, 2023. This step will increase yields for tokenholders to eight percent, as stated by Cointelegraph.
According to Cointelegraph, the move established the Enhanced Dai Savings Rate (EDSR). From what it’s understood, this initiative would result in a momentary rise of Dai Savings Rate (DSR) presented to users. It’s believed that the initiative would depend on DSR utilisation, as they share an inverse relationship.
“The EDSR helps fix this by ensuring that Dai holders get a more fair amount of value from the increased returns generated by the protocol. In turn this might help spur adoption,” Rune Christensen, co-founder, MakerDAO, said. Christensen added that DSR’s portfolio policy involves 75% distribution to real-world assets and 15% in Coinbase’s custody. In June, 2023, MakerDAO increased its DSR to 3.49%. However, the step developed into underneath seven percent of total DAI supply kept in DSR.
“In practice though, DSR utilisation is near 0, which gives us excessive margins and a huge windfall of surplus on top of what we would naturally be earning with the protocol at this size. The income we are currently earning is much greater in reality than what is even shown on e.g. makerburn,” the proposal mentioned.
Moreover, Cointelegraph noted that the new yield intends to amplify DAI adoption, with regard to global fall in stablecoin market capitalisation. In March, 2023, MakerDAO increased its US Treasury bond-based holdings to $1.25 billion, which recorded a 150% rise.
(With insights from Cointelegraph)