Dai's Dai Savings Rate (DSR) is one of the most anticipated features of Dairy Dai.
The deposit rate will allow Dai to further differentiate itself from other stable currencies. In addition to continuing to provide decentralized stable coins, Multi-Cured Dai supports any holder to lock Dai into the Dai Deposit Rate (DSR) Smart Contract to earn demand deposit interest. The Dai deposit rate will greatly stimulate Dai's demand and enrich Dai and the US dollar's anchored monetary policy toolbox.
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Lock Dai to get interest
When the multi-mortgage Dai is released, any holder can lock Dai into the Dai deposit interest rate smart contract to obtain deposit interest.
You can treat the Dai deposit rate as a current deposit account for the cryptocurrency.
- The holder deposits Dai from his wallet into the Dai deposit rate contract.
- When the user's Dai is in the deposit rate contract, the user automatically receives the variable deposit rate determined by the Maker agreement.
- Dai holders can unlock Dai and earn interest at any time from the deposit rate contract.
Throughout the process, Dai in the deposit rate contract is always controlled by the holder himself.
For example, Dai holders deposit 100 Dai at a 5% deposit rate per year and 105 Dais after 12 months.
Dai Deposit Rate DApp Sample
The success of Dai's deposit rate depends on the Maker Credit Agreement offering competitive market rates. Let us now look at the governance and risk dimensions of the Dai deposit rate.
Governance and risk
The Dai Deposit Rate (DSR) will play a very important role in MakerDAO monetary policy governance to maintain the anchoring of Dai and the US dollar.
In the single-backed Dai, the monetary policy tool used to maintain Dai's stability has been the Stability Fee. The adjustment of the stable rate is determined by Maker governance, which incentivizes the CDP owner to lend or repay Dai, thereby affecting Dai's price until equilibrium is achieved. The core of the stable rate is to adjust from the supply side by changing the cost of borrowing Dai.
The Dai deposit rate provides another tool for Maker's monetary policy adjustments. Dai deposit interest rates can affect the behavior of Dai holders (and not just the behavior of CDP owners), which in turn helps Dai's price stability from the demand side. If Dai's price is lower than the target price, Maker governance is expected to increase the Dai deposit rate, motivate users to buy Dai, and increase Dai price; if Dai price is higher than the target price, Maker governance is expected to lower the Dai deposit rate to slow Dai's oversupply, The Dai price is lowered back to the dollar anchor level.
Who pays Dai deposit interest?
In theory, the Dai deposit rate is designed to ensure that the Dai portion of the interest portion is not generated out of thin air (ie, the Dai portion of the interest portion is fully guaranteed). This means that this part of Dai is borne by the Maker ecosystem participants, and Maker governance should consider who will be the ultimate bearer of this cost.
At the account level, Dai deposit interest and loan interest are recorded in the same entry. In other words, the deposit interest Dai is recorded as the offset of the interest on the loan (ie, the stable fee). If the Stabilization Fee does not cover the total expenditure of the Dai Deposit Rate, the difference is recorded as a bad debt and an additional MKR is issued to cover the difference.
Although the MKR holder is the ultimate risk taker of the Dai deposit rate, the CDP owner will pay the deposit interest fee through the Stabilization Fee premium in the Maker Agreement.
The stabilization fee generally consists of two parts: 1) the special collateral risk premium, which is the risk transfer of the CDP owner to the MKR holder; 2) the Dai deposit interest rate adjustment, which is the risk transfer of the CDP owner to the Dai holder. In essence, the CDP owner compensates for the risks of the two participants in the Maker ecosystem: the risk of the MKR holder guaranteeing the collateral, and the Dai holder taking the risk of Dai instability.
Compare with other DeFi platforms
At present, many DeFi platforms provide Dai's deposit and interest service, and it is important to understand the difference between Dai's deposit rate (DSR) and other DeFi interest.
The key point is that the security of depositing Dai into a DSR smart contract is exactly the same as the regular holding of Dai. Unlike centralized deposit and loan products, the Dai deposit rate has no counterparty risk. Because Dai is a global debt, it is based on Ethereum's decentralized escrow guarantee, and MKR is the ultimate risk insurance.
Dai Deposit Rate (DSR) is the least risky deposit instrument of Dai, equivalent to the “statutory deposit reserve ratio”. Other deposit services in the DeFi ecosystem are at different risk.
Dai deposit interest rate initial value
Prior to the release of the multi-mortgage Dai, the Maker community will determine the initial value of the Dai deposit rate through a governance survey. The initial value option will be proposed by the Risk Governance team based on the formal discussion of the MakerDAO Forum. After selecting the initial parameters through a governance vote, the community expects a quick iterative adjustment until the Dai deposit rate is balanced and the price of Dai is stable.
After the Maker system has obtained enough empirical data, it is possible to more effectively determine the Dai deposit rate and adopt a more regular model based on the data.
to sum up
The focus of the multi-mortgage Dai deposit rate:
- When the multi-mortgage Dai is launched, the Dai holder can obtain a stable deposit interest.
- Dai's deposit interest rate will help Dai's anchoring by enriching the MakerDAO monetary policy governance tool on the demand side.
- In theory, MKR holders bear the ultimate risk of Dai deposit rates.
- MakerDAO Governance determines how stable costs transfer payments to Dai deposit rates.
- Dai deposit interest rate (DSR) is exactly the same as holding regular Dai. The Dai deposit rate is the least risky Dai deposit service.
- After the multi-mortgage Dai is released, users participating in MakerDAO should prepare a fast iterative process to determine the effective Dai deposit rate.
If you hold Dai, you can prepare to lock Dai and earn interest. If you hold MKR, please be prepared to vote and set the Dai deposit rate.
In the meantime, if you have other ideas or questions, you can participate in the discussion at the MakerDAO official forum (forum.makerdao.com).
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