The MakerDAO community approved a proposal on July 27th to introduce the Enhanced Dai Savings Rate (EDSR), aimed at temporarily increasing interest rates for stablecoin Dai holders. The EDSR mechanism will allow token holders to earn yields of up to 8%, and the boost will be determined based on the utilization of the Effective Dai Savings Rate (DSR), gradually decreasing as DSR utilization rises.
The proposal aims to address the issue of low DSR utilization, despite efforts to make DAI more competitive. In June, MakerDAO increased the DSR to 3.49%, but only a small percentage of the total DAI supply was deposited into the DSR. With the EDSR , Dai holders will receive fairer value from the increased returns generated by the protocol, potentially stimulating adoption.
Currently ranking third among stablecoins, DAI's market capitalization has declined from $8.6 billion in 2022 to $4.5 billion at the time of writing. In comparison, Tether and USDC hold the top spots with market caps of $83.7 billion and $26.5 billion, respectively. To remain competitive amid market turmoil, MakerDAO has implemented various measures, including increasing its holdings of US Treasurys by 150% to $1.25 billion to strengthen its portfolio.
The EDSR's yield enhancement is expected to attract more users and increase DAI adoption, providing Dai holders with a more attractive option for earning returns on their holdings. With the mechanism in place, MakerDAO aims to strike a balance between generating revenue and incentivizing users to utilize the DSR feature for greater benefits. By offering more competitive yields, MakerDAO seeks to improve DAI's standing in the stablecoin market and solidify its position as a reliable and attractive option for crypto users.
