For those actively involved with DeFi and the Ethereum ecosystem at large, it’s well known that Dai – a decentralized stablecoin issued through the MakerDAO protocol – has quickly become the defacto currency when it comes to combatting volatility. Today, we see yet another signal of this become a broader narrative with Coinbase offering support for Dai on their debit card which launched this past April.
For those unfamiliar with the Coinbase Card, the debit card allows users to spend currencies directly from their Coinbase account including popular assets like Bitcoin (BTC) and Ether (ETH) along with more obscure assets like Brave’s Basic Attention Token (BAT), Augur Reputation (REP), Stellar Lumens (XLM) and 0x Protocol Tokens (ZRX), Bitcoin cash (BCH) and Litecoin (LTC).
Why Does This Matter?
For those of us who have been following the stablecoin race over the past year, you may know that Coinbase was heavily involved with the launch of US Dollar Coin (USDC), a collaborative effort by Circle and Coinbase.
With this in mind, the question now becomes – why support DAI before USDC?
While there is no concrete evidence to back these assumptions, it’s likely that the recent launch of Maker’s Multi-Collateral Dai may be playing a big role in this addition. For those unaware, MCD marked the launch of the Dai Savings Rate, a passive way for Dai holders to earn an annualized return on Dai locked through Oasis Save.
Unlike USDC, this means that Dai becomes a stablecoin with a built-in toolkit for custody providers to earn additional interest on their reserves. While USDC is currently supported on Compound – a protocol for lending and borrowing different currencies – the interest rate currently being offered (3.95%) is soon to be less than the new Dai Savings Rate of 4% (assuming this executive poll passes). Similarly, the DSR places reliance back on the currency issuer (MakerDAO) rather than on a third party (Compound).
Maker was very vocal that major exchanges would be integrating the Dai Savings Rate directly into their back-end(s), meaning that Coinbase would be a likely candidate to have all of their Dai AUM earning a passive interest. More broadly speaking, this also signals to increase adoption of Dai itself, something that will be likely to make it a stronger stablecoin contended in the market at large.
On a more obvious note, the introduction of Dai marks a robust way for a customer to truly start “buying coffee with crypto”. As we all known, the inherent volatility with virtually all cryptocurrencies made it difficult for the average retailer to accept them as a form of payment. While we’ve seen multiple solutions for consumers being able to spend these currencies, the lack of a stable payment method resulted in many fearing they would become the next Bitcoin Pizza Guy.
With the advent of the Dai Savings Rate, it’s now possible for customers to not only have peace of mind that their value will remain stable, but also have a way to spend and possible earn interest on those holdings.
If one thing is for sure, the composability surrounding the largest DeFi ecosystem is become truly fascinating to watch. As more exchanges start becoming larger players in the space, there’s no telling what new products and services will spawn from their involvement.
Cooper is focused on building compelling blockchain products. He currently works as the managing director at Fitzner Blockchain Consulting and is a contributor to DAOs like MetaCartel and Moloch. He is an active member of the Ethereum community and has a strong interest in for-profit businesses such as The Block Crypto and Messari.