Why the Dai Savings Rate is a Game-Changer for the DeFi Ecosystem, and Beyond

November 16, 2019

Cryptocurrencies, especially stablecoins like Dai, allow people everywhere to achieve financial independence, regardless of their circumstances and without help—or interference—from a bank. Our own Head of Smart Contracts, Mariano Conti, uses Dai in Argentina for his savings, which has protected his family from devaluation of the Argentine peso. On the other side of the world, on the remote islands of Vanuatu, which has some of the highest money transfer fees in the world, Oxfam and the startup Sempo successfully piloted a cash-assistance program through which residents were given Dai.

With the launch of Multi-Collateral Dai (MCD) on November 18, all users will be able to upgrade their Single-Collateral Dai (Sai) to MCD. The upgrade will allow Dai holders everywhere to better power their journeys to financial inclusion by taking advantage of a new feature implemented directly in the Maker Protocol: the Dai Savings Rate (DSR). The DSR will allow all Dai holders to earn savings automatically and natively by locking their Dai into the DSR contract. DSR also presents new opportunities to cryptocurrency traders, startups, and established businesses to increase the return on their DAI holdings and operating DAI capital.

As Dai holders increasingly take advantage of DSR’s potential, it will secure the DSR’s critical role within the underlying infrastructure of the entire decentralized finance (DeFi) space.

Simple. Free. Powerful.  

DSR’s true power lies in its simplicity: with a few simple steps, users not only earn an attractive return on their Dai holdings via Dai’s native platform, but they also earn it without fees.

Whether you are an individual, an entrepreneur, a trader, a partner, or a developer, the DSR is a powerful new tool for you and the entire DeFi ecosystem

Benefits for All Users

The DSR helps balance the Maker Protocol. Funded from the Stability Fees paid by Maker Vault owners, the DSR acts as another mechanism to help balance the entire system to maintain Dai’s peg to the US Dollar.

The DSR presents no liquidity impediments. No minimum deposit is required to earn the DSR, and users can withdraw any or all of their Dai at any time. Dai is simply either “in” or “out” of DSR Mode.  

The DSR preserves user control. Dai holders retain total and independent control over their locked-up Dai at all times, and only a Dai holder may remove their Dai from the DSR. 

The DSR is free and available to any Dai holder. Dai holders can earn savings automatically and natively by locking their Dai into the DSR. While other platforms, such as Compound, currently permit Dai users to accrue a return on their Dai, Dai users can earn directly via the Maker Protocol with the release of MCD. One of the best features of DSR—in addition to users retaining control over their Dai—is that it does not require a user to make an initial deposit of a specific amount, maintain a minimum daily balance, pay monthly fees, or adhere to withdrawal limits. One only has to lock their held DAI in the DSR smart contract to take advantage of the DSR’s benefits.

A Dai holder deposits 100 Dai at a Savings Rate of 5% per year, and then withdraws 105 Dai after 12 months. (Note: Users are in control of and can withdraw their Dai anytime.)

The DSR is a powerful, more secure way to put your money to work. An example of how blockchain technology gives everyone equal access to financial services, the DSR is a driver of individual financial inclusion and control.  

A mock-up of the DSR dapp. 

The DSR creates a stable store of value. The DSR is a key component of the Maker Protocol. Users may rely on Dai earned within the DSR to try to protect their savings from inflation. 

Exchanges are integrating DSR, benefitting savers and traders. Trade and earn simply on idle Dai held in the DSR minute-by-minute once exchanges complete the integration.

Benefits for Entrepreneurs and Businesses

The DSR can help grow uncommitted assets. All types of businesses, large and small, will be able to earn additional Dai on their capital float. Dai that is not committed to expenditures or operating capital can be locked into the DSR and accrue DSR earnings until the company needs to draw those funds.

The DSR stimulates DeFi growth opportunities. The DSR is a feature of an open and decentralized Maker Protocol. Therefore, anyone can build DSR frontends. When entrepreneurs and developers build DeFi applications that allow their users to take advantage of the DSR, they can also benefit from the DSR. 

The DSR is available for use in other dapps. Because it is just another smart contract in the Maker Protocol, the DSR is completely composable and ready for developers to use in their own decentralized apps. In other words, any developer can build a user interface and integrate the DSR into their dapp.

The Role of DSR in the DeFi Ecosystem 

Any industry that interacts with the world of financial services (e.g., real estate, trade finance, remittance, non-profit organizations, etc.) can benefit from decentralized finance. Moreover, any industry that can benefit from DeFi and innovate using Dai can also take advantage of DSR.

“The most amazing aspects of the DSR are that it has no counterparty credit risks and it can be implemented on the backend of any DeFi product that uses Dai,” says Rune Christensen, CEO of the Maker Foundation. “The inherent efficiency of the Maker Protocol and, by extension, the DeFi ecosystem, are what allow the DSR to provide great savings opportunities for people everywhere.”

The world is just beginning to learn the advantages of digital currency, and, for many, that search for understanding is driven by a need for something better than what traditional financial services currently provide. People all over the world are left out of the system because they have “less than.”  Those individuals deserve equitable opportunity. Simply put, everyone wants a fair shot at their dreams, and Dai and the DSR can help them get it. 

There’s a lot of talk in the crypto space about how DeFi is disrupting the financial industry. But that assertion doesn’t tell the whole truth. DeFi is actually augmenting the present financial system, and it’s doing so in two big ways. First, it’s taking what currently exists and making it better and more accessible. Second, it’s drawing brand new technology into the economy. In other words, DeFi supports existing finance because it creates new economic opportunities for individual and business users. DeFi allows us all to talk about transparent finance and improved security as ways to help what ails the current system, not to destroy it.

Three Days and Counting

The starting value for the Dai Savings Rate will be determined by Executive Vote and then publicly announced at the launch of MCD. At that time, users will immediately be able to access the DSR through Oasis Save and start earning on their Dai. In the meantime, to learn more about the DSR, including how it’s determined, how it’s funded, and how it works, read An Update on the Dai Savings Rate in Multi-Collateral Dai.

November 16, 2019