Yesterday, the Coinbase exchange surprised everyone by announcing the DAI Rewards program that will allow its users to earn interest in Maker’s stablecoin, DAI.
Dai Rewards with 2% APY is now available for Coinbase customers in the US, UK, Netherlands, Spain, France, and Australia.https://t.co/FGkFHBxZVM
— Coinbase 🛡️📞 (@coinbase) July 29, 2020
This is a new initiative that will be part of the Earn program, which allows crypto users to earn money by learning and watching short videos related to different blockchains.
With this new program, users can now also earn interest by simply holding this stablecoin on their account.
DAI Rewards is an initiative targeting users in selected countries only. The program is not available to citizens of Hawaii, England, Spain, Holland, France and Australia.
How does Coinbase DAI Rewards work?
To earn interest everyone must have their account verified, which means they must have done the KYC (Know Your Customer) procedure and have at least $1 in DAI in their account.
The interest is distributed after 5 days from the deposit of DAI and later the threshold will be lowered to only one day.
It is interesting to note that participation in this initiative can be deactivated from the account settings, either through the web interface or the mobile application, despite there being no actual reasons not to participate.
As far as the interest rate is concerned, the APY (Annual Percentage Yield) is 2%, which is high compared to traditional systems but low compared to other DeFi programs.
For example, the Compound protocol now offers over 7%, while Aave offers up to 23%.
And this is the reason why many people are criticizing the choice of the parameter, considering it too low, especially given the mandatory KYC procedure.
Lastly, it is worth mentioning that this incentive, as explained by Coinbase itself, may vary over time and therefore the rate may rise or fall.
This doesn’t apply to those who hold the DAI stablecoin on the Coinbase Pro platform, so in order to obtain interest it is essential to use Coinbase and not its Pro version.
DeFi on Coinbase
In any case, it is possible to see how another part of decentralized finance (DeFi) has landed on centralized platforms, despite the fact that the real potential of the sector is greatly limited.
It raises the question of what is the point of using centralized exchanges for these operations, but it is also true that for an inexperienced user it is certainly an advantage to have an easy to use platform.