Rune Christensen claims that EDRS ensures that DAI holders "get a more fair amount of value from the increased returns generated by the protocol."
On July 27th, MakerDAO obtained approval from its community to provisionally enhance the interest rate offered to tokenholders, possibly reaching up to 8%.
The move is a part of Maker's strategy to ramp up demand for its stablecoin, Dai (DAI).
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This recent approval led to the introduction of the Enhanced Dai Savings Rate (EDSR), an interim solution aimed at maximizing the Dai Savings Rate (DSR) for users. The optimized mechanism will be proportional to the DSR utilization and is set to decrease as DSR adoption escalates.
In the proposal accepted by the community, Rune Christensen, co-founder of MakerDAO, emphasized the role of the IDSR, stating:
The EDSR helps fix this by ensuring that Dai holders <...> get a more fair amount of value from the increased returns generated by the protocol. In turn, this might help spur adoption.
Christensen added that despite the interest rate elevation, the DSR continues to show a substantial spread with a portfolio strategy involving a 75% allocation to real-world assets and a 15% reserve with Coinbase.
Earlier in June, MakerDAO had hiked its DSR to 3.49% to make DAI a more competitive offering. However, the result was a meager 7% of the overall DAI supply poured into the DSR. According to the proposal:
In practice though, DSR utilization is near 0, which gives us excessive margins and a huge windfall of surplus on top of what we would naturally be earning with the protocol at this size. The income we are currently earning is much greater in reality than what is even shown on e.g. makerburn.
As the global stablecoin market capitalization encounters a slump, the enhanced yield is an effort to propel DAI acceptance.
BitDegree data shows that DAI is the third largest stablecoin with a market cap of $4.5 billion, a dramatic decline from $8.6 billion in 2022. DAI falls behind Tether (USDT) and USD Coin (USDC), which possess market caps of $83.7 billion and $26.5 billion, respectively.
Amidst global market fluctuations, MakerDAO remains vigilant, implementing proactive strategies like enhancing DAI's interest rates and boosting its US Treasury bonds holdings to maintain its competitive edge and foster DAI's acceptance in the crypto arena.
