MakerDAO: interest rates on the rise
MakerDAO: interest rates on the rise
Defi

MakerDAO: interest rates on the rise

By Marco Cavicchioli - 24 Jan 2020

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Holders of MakerDAO’s MKR tokens are voting to raise interest rates, particularly the Dai Savings Rate (DSR), which is the rate that DAI holders pay to keep their tokens in MakerDAO’s smart contract. 

If the vote is successful, holding Dai tokens could soon generate 7.75% interest, about four times more than what can be obtained by depositing dollars into a US bank account. 

In fact, the value of the stablecoin Dai tokens is algorithmically anchored to that of the US dollar. 

Unlike the past votes, in which the owners of the MKR tokens decided directly on the amount of the DSR, this time they will express themselves on the Dai Stability Fee, which is the cost of loans in DAI, and on the DAI Savings Rate Spread, i.e. the difference between the Stability Fee and the Savings Rate itself. 

A new formula has recently been agreed upon, according to which the DSR (Dai Savings Rate) is calculated as the difference between the Dai Stability Fee and the Dai Savings Rate Spread, to make sure that the MakerDAO deposit and loan rates are always linked to each other, with the DSR always lower than the Stability Fee. 

The vote in place specifically concerns Stability Fee between 10% and 2% and a Spread between 4% and 0.25%. 

If the increase of the Stability Fee and the reduction of the Spread are approved, users could get a Dai Savings Rate of 9.75%, but what is gaining more votes is 8% of Stability Fee (with 62.45% of votes cast by MKR token holders) and the Spread at 0.25% (99.46% of votes). This means that the DSR is likely to increase to 7.75% from the current 6%. 

In addition, since MakerDAO acts as a kind of “central bank” of the DeFi, it is possible that the rates of other lending platforms will also adjust to this change.

The increase in the rate is due to the increase in the DAI offer, which yesterday exceeded 100 million, causing its value to move slightly below parity with the dollar.

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 11 thousand subscribers.

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