MakerDAO, the decentralized autonomous organization responsible for the DAI stablecoin, has proposed increasing the DAI Savings Rate (DSR) to 3.3%. This adjustment would mark a substantial surge from the current rate of a mere 0.6% if approved. The move comes as the US Federal Reserve takes measures to tackle persistently high inflation by raising interest rates.
The DAI Savings Rate, or the DSR, can be flexibly adjusted to reflect short-term shifts in the DAI market. Moreover, interest on deposits accrues in real time from the system’s revenue. The proposal is garnering significant support from the MakerDAO community, as many members believe the increase will attract more users to DAI.
One community member voiced their approval, stating that if the proposal is successful, they will seek an alternative to decentralized finance (DeFi) borrowing. MakerDAO has previously observed positive outcomes from raising the DSR.
In February, when the rate was increased by 1%, over 35 million DAI flooded into deposits within a month. This highlights a higher DSR’s potential impact on the platform’s growth.
Despite the enthusiasm within the MakerDAO community, the proposal still needs to undergo a formal voting process before it can be implemented. If approved, the revised DSR would align more favourably with current market conditions and incentivise users to deposit their DAI.
Earlier in April, the controversy surrounding the MKR collateralized platform to borrow DAI sparked mixed opinions on Twitter. Some voiced concerns, with Marco Manoppo, a researcher at Digital Asset Research, warning that this move could be akin to “playing with fire,” considering the volatility witnessed in crypto history.
Upon hearing about the proposed increase in the DSR, a significant portion of the community reacted negatively, suggesting that MakerDAO is regressing by failing to learn from past experiences. It remains to be seen how MakerDAO will address these concerns and whether the proposal will succeed in the formal voting process.
