Author: LianGuaiBitpushNews Mary Liu
Dune data shows that after MakerDAO increased the Dai Savings Rate (DSR) from 3.3% to 8%, MakerDAO has attracted nearly $700 million in funds deposited. The purpose of this move is to promote the adoption of the stablecoin DAI, the LianGuairk Protocol, and DSR.
Since the interest rate increase, the amount of DAI deposited in DSR has doubled to over $1 billion.
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DAI now offers the highest yield among stablecoins, surpassing various money market rates and DEX LP returns. Many cryptocurrency celebrities are also participating. Blockchain data shows that Tron founder Justin Sun’s wallet exchanged more than 90,000 stETH for 77.8 million DAI and deposited it into Maker. With an 8% annual yield, he can easily earn over $10,000 per day.
This is the second time Maker has raised the savings rate. The first time was in May, when it increased from 1% to 3.3%. With the introduction of Curve and Aave’s new stablecoins, this move is aimed at stabilizing DAI’s market share.
Curve’s crvUSD and Aave’s GHO allow users to mint stablecoins based on the protocol that generates income. This means that users can continue to earn passive returns while obtaining stablecoin liquidity based on their assets.
Therefore, increasing DSR allows DAI to compete with its new competitors for market share. The LianGuairk protocol is a branch of the Aave v3 lending protocol launched with the support of MakerDAO in May. The DAI-centric money market also creates new use cases and income opportunities for DAI holders, allowing depositors to access DSR and obtain loans using DAI as collateral.
Volatility in the Aave DAI market
The interest rate on DAI on the top money market protocol Aave v3 has been fluctuating dramatically in recent months.
From February to mid-June, the borrowing cost of DAI remained stable between 2% and 4%, with a maximum increase of up to 10%. On July 13, the rate soared to 31% and touched 26% twice before the end of the month.
In the first week of August, the rate is still fluctuating and seems to be rising again.
The rise of the LianGuairk protocol may provide alternative sources of income for stablecoin holders, further exacerbating the volatility in Aave’s DAI market.
Is the strategy sustainable?
A report released by Delphi Digital shows that this strategy has had a significant financial impact. With DSR currently set at 8%, Maker’s estimated annual cost is $54 million. As a result, Maker’s projected annual profit is expected to decrease from $84 million/year to $41 million/year. Nevertheless, this can be seen as a customer acquisition cost that reignites DAI demand.
Analysts say that, in simple terms, EDSR is based on a multiplier of 3.19% of the DSR base interest rate. As the utilization rate of DSR increases, this ratio will decrease, with an upper limit of 8%:
0-20% = 3x DSR = 8%20-35% = 1.75x DSR = 5.58%35-50% = 1.3x DSR = 4.15%
As more DAI is minted, Maker will generate more interest on newly minted DAI than it pays out for DSR. However, as DSR deposits increase, this dynamic will put pressure on Maker’s profitability, causing it to decrease unless it reaches a level of 4.15% EDSR.
Delphi Digital believes that the enhanced version of DAI DSR provides an attractive on-chain alternative to US Treasury bonds. Given its higher yield, the DSR utilization rate may stabilize below 35%, consistent with the current Treasury bond benchmark rate of 5.5%. This strategic move aims to drive Maker’s development and lay the foundation for the introduction of the Maker SubDAO, aiming to increase the demand and utility of DAI and MKR tokens.
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