Lowering $DAI Saving Rate | Crypto Daily Digest Aug. 9

TI Research

Two days after MakerDAO adjusted the DAI savings rate up to 8%, founder Rune proposed lowering it to 5%. What's the logic behind to lower DSR so quickly?

A few days ago, MakerDAO adjusted the $DAI savings rate to 8%. Today, the founders of MakerDAO are proposing to lower the $DAI savings rate to 5% and expand the Utilization Range.

After just two days of raising the savings rate, MakerDAO has proposed to lower the rate. This is because the initial 8% rate was essentially a one-time "promotion." Founder Rune explained during discussions about increasing the Dai Savings Rate (DSR): Enhanced Dai Savings Rate (EDSR) is a temporary mechanism used to boost the effective DSR available to users in the early stages of low DSR utilization.

EDSR is determined by DSR and its utilization rate, gradually decreasing as the utilization rate increases, until it disappears when the utilization rate becomes sufficiently high. As more DAI is deposited into DSR, the rate decreases unidirectionally and cannot increase again after reaching a certain threshold. According to the table below, if the utilization rate exceeds 20%, the DAI savings rate will start to decline.

Founder Rune Christensen noted that within 48 hours of EDSR's launch, the Dai supply increased by nearly 500 million, and the DSR utilization rate had nearly reached the 20% threshold.

This highlights the substantial demand in the market for a well-known stablecoin offering high interest rates. If the 8% rate were to be maintained, the utilization rate might quickly surpass 35%. Therefore, Rune proposes a unified savings rate of 5% for the utilization range of 0% to 40%, allowing a larger user base to access relatively higher DAI savings rates.

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