MakerDAO Officially Reduces DAI Interest Rate to 5%

After a period of experimentation and encountering some challenges, the MakerDAO community has officially adjusted the Enhanced DAI Savings Rate (EDSR) from 8% to 5%.

Key Changes:

• Interest Rate Adjustment: In a previous forum post, founder Rune Christensen discussed the limitations of the "Push DAI EDSR to 8%" approach. As a result, a new proposal was announced to reduce the interest rate cap from 8% to 5%. The MakerDAO council voted and officially approved this plan on 18/08.

• Implementation: The changes took effect at 09:24 AM on 20/08. Alongside the reduced interest rate cap, borrowing rates for various Vaults were significantly increased to prevent interest rate discrepancies and arbitrage from EDSR staking.
• Debt Ceiling Increase: The debt ceilings for Ethereum-related Vaults were raised, allowing users to mint more DAI from their collateral assets.

Current Statistics:

• DAI Staked: At the time of writing, approximately 1.48 billion DAI is staked in the DSR contract, with the utilization rate fluctuating around 27%.

Market Reactions:

• Stablecoin Markets: Other stablecoin markets have shown limited reactions as the implementation date approaches. Most stablecoins that had depegged in recent days, such as GHO, FRAX, and USDT, have seen slight increases to adjust to these interest rate changes.
• Curve Finance Adjustments: Liquidity proportions in Curve Finance's 3pool have also adjusted, with the ratios of DAI and USDC gradually increasing to around 28%, helping stabilize USDT's exchange rate in recent hours.

Future Plans:

• Spark Protocol Airdrop: Following the interest rate reduction, MakerDAO is discussing the possibility of airdropping tokens from a subDAO, Spark Protocol, to its users. This proposal is still under discussion and has not yet been put to a community vote.
• Large Withdrawals: After the reduction of the DAI savings rate in Spark Protocol to 5%, significant withdrawals have occurred. Notably, Justin Sun withdrew 206 million DAI, converting it back to 235,556 wstETH.

The interest rate reduction represents a strategic move by MakerDAO to ensure sustainable growth and stability in the DAI ecosystem, while continuing to adapt to market dynamics and user needs.