- MakerDAO’s community backs a governance proposal to boost DAI’s demand by potentially offering up to 8% yield to its token holders.
- The new approach comes amid a dip in DAI’s circulation and the broader stablecoin market, looking to rejuvenate the market value of this $4.6B stablecoin.
Stepping into the game to turn the tables, MakerDAO, a major player in the decentralized finance (DeFi) lending arena, has decided to drive the demand for its $4.6 billion DAI stablecoin by offering enhanced yields to token holders. Following a governance vote concluded on Thursday, the DeFi community showcased its support for the Enhanced DAI Savings Rate (EDSR), potentially enabling DAI holders to earn interest as high as 8%.
Navigating the Stablecoin Downtrend
This tactical move comes against the backdrop of DAI’s circulation witnessing a downward trend, shrinking by one-third from its previous year’s figure of $6.9 billion. Likewise, the broader stablecoin market, a critical pillar and liquidity source in the crypto ecosystem, has seen a downtrend, dropping from nearly $160 billion a year ago to $127 billion now.
MakerDAO has been actively engaging in strategies to boost DAI’s attractiveness. The protocol has been increasingly backing DAI with yield-generating assets like government bonds, sharing a portion of this revenue with the users. To outshine competing stablecoins that don’t offer such benefits to holders, the protocol elevated the DSR to 3.49% last month. However, this resulted in only $306 million being deposited in the DSR, accounting for less than 7% of the total supply.
MakerDAO’s founder, Rune Christensen, expressed his views on the matter in a governance forum post, stating,
“We have not yet managed to generate sustainable growth in new demand and capital inflows. The EDSR helps fix this by ensuring that DAI holders pioneering the adoption of DSR get a more fair amount of value from the increased returns generated by the protocol.”
The EDSR rate determination will be based on the amount of deposits in the DSR facility and the base reward rate, and it will progressively decrease as the usage swells. With the introduction of this potentially 8% yield, MakerDAO is setting a new trajectory for DAI, aiming to rekindle its growth in the dynamic crypto landscape.
