Block Analitica proposes raising the DAI savings rate for MakerDAO

Block Analitica has proposed to the MakerDAO community to raise the yield on DAI locked in the platform’s smart contracts to 3.33% per year.

An important set of parameter changes for several Maker Vaults will be included in an upcoming Executive Vote, in accordance with the most recent publication of Stability Scope Parameter Changes by @BlockAnalitica.

→ https://t.co/ZVK1zKiFEn pic.twitter.com/GHGvUkU4Kc

— Maker (@MakerDAO) May 26, 2023

The Block Analitica proposal was supported by the MakerDAO Risk Core Unit Team. The initiative envisages raising the DAI Savings Rate (DSR) from the current 1% to 3.33%.

The DSR smart contract allows DAI holders to lock the stablecoins to earn profits in accordance with the set interest rate. The system is one of the main levers of the platform’s monetary policy.

«This creates a completely new direction of incentives for balancing supply and demand for DAI. This model enables capital to be deployed more efficiently while performing its primary role — providing users with strong and decentralised stability», — in the блоге MakerDAO.

Payments to users under the DSR are funded through stability fees, which are levied on Vault holders.

The last time the MakerDAO community raised the DSR was in December 2022. In February, developers said that, amid the rate increase, more than 35 million DAI flowed into the platform’s smart contracts in a single month.

Raising the DSR to 1% led to more than 35 million DAI being deposited in a month.

The DSR is a Maker Protocol module that can be plugged into any other DeFi tool, extending the baseline yield of DeFi to a broader group of users.

How can a DeFi protocol connect to the DSR? ↓ pic.twitter.com/vXwcKFCuP6

— Maker (@MakerDAO) February 2, 2023

The founder of Block Analitica Primoz Kordez noted that if the proposal is adopted it would push up yields across the entire DeFi sector.

According to him, DAI is a relatively low-risk instrument, unlike protocols such as Aave and Compound. Therefore the latter will have to adjust parameters to attract users.

Stablecoin suppliers at Aave and Compound earn around 2%-2.5% and a decent amount of capital should flow to DAI DSR to push supply rates to a range of 3.5%+. I personally think the supply rates should be at least 50bps above DAI DSR as risk premium is higher (rehypothecation)

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— Primoz Kordez (@PrimozKordez) May 26, 2023

In May 2023, the MakerDAO developers launched the Spark Protocol liquidity market for DAI.