DSR: Dai Savings Rate by Maker Foundation
2 min read
CEO of the Maker Foundation Rune Christensen announced that the Multi-Collateral Dai (MCD) is ready to launch on Nov. 18 at DevCon 5 in Osaka, Japan before the large crowd arrives.
This means that holders/traders will soon have the capability to earn interest with their DAI. It’s all because of the new feature coming with Multi-Collateral Dai called the Dai Savings Rate, or DSR for short.
Below is an explanation of what is Dai Savings Rate from DeFi Pulse.
What is the Dai Savings Rate (DSR)?
The Dai Savings Rate is a mechanism for the MakerDAO to control the demand side of the supply and demand equation by offering an interest rate for locking in some of the total DAI supply. Up until this point, MakerDAO only had the ability to directly affect the supply of DAI through the stability fee it charges CDP holders.
How does it work?
Once live, DAI token holders will have the option to lock their DAI into Maker’s DAI Savings Rate contract and earn a variable interest rate in DAI. The DAI necessary to pay the DSR contract is taken from the stability fee pool. If the pool ever runs dry, the Maker contract prints new MKR to cover the debt. Ultimately, it’s up to MKR holders to properly govern the rate and ensure the system runs smoothly.
A recent DSR update discussed some of the challenges in governing this new component of the MakerDAO system.
How much will I make for locking in my DAI?
The rate is not set in stone like the stability fee its controlled by MakerDAO token holders. However, we can assume that the DSR can never be greater than the stability fee. And, the current stability fee is 10.5% (subject to change with MCDai). We can also look towards existing secondary lending markets which currently offer around 8% APY to get an idea of what would be competitive.
MKR Holders, don’t forget to vote for MCDai on November 15th. Stay tuned for more details about Multi-Collateral Dai and how to start earning with the DSR!
