What is the Dai Savings Rate?

The Dai Savings Rate, better known as the DSR, is the interest rate paid to deposits of Maker’s Dai stablecoin in a specific Dai savings contract.

It was launched in November 2019 when Maker upgraded to Multi-Collateral Dai and can be thought of as a “savings account” for Dai holders which is funded by stability fees – or the “debt” accrued by users who open Vaults to mint new Dai.

The DSR is an integral part of the Maker project, and provides valuable influence over the demand for the Dai. Similarly, the DSR is determined by MKR token holders via executive governance polls.

When the DSR is higher, more demand is created for Dai. When the DSR is low, Maker holders are looking to stimulate increased supply.

Dai Savings Rate Historical Changes

Here are all of the DSR interest rates to date:

Date ChangedNew DSRChange (+/-)
March 24th, 20200%(-4%)
March 19th, 20204%(-4%)
February 26th, 20208%(+0.5%)
February 12th, 20207.5%(-1.25%)
February 5th, 20208.75%+1%
January 27th, 20207.75%+1.75%
January 8th, 20206%+2%
December 7, 20194%(0)

How Does it Work?

A Dai holder can lock their Dai tokens into the DSR contract whenever they desire.

To get started, visit https://oasis.app/?lang=en

Oasis is the main dApp affiliated with MakerDAO, for all things Dai.

To access the DSR smart contract, click “Save”.

Here, a user will be required to connect their Ethereum wallet. Oasis supports web 3.0 wallets such as Metamask and Coinbase Wallet, as well as hardware wallets Trezor and Ledger.

Once connected, click “get started”. The current DSR rate will be displayed above the green button.

Before you can deposit any funds, Oasis will request two permissions from the user’s wallet – one of these bundles transactions to make them cheaper, and the other approves access to Dai in the connected wallet.

Once these are both approved, click “Continue”.

The next window allows the user to deposit Dai into the DSR! Simply enter the amount of Dai to deposit, and click “Continue”.

A final confirmation window will appear, to ensure complete understanding of the action. To finalize the DSR deposit, check the box regarding the terms and conditions, and click the green “Deposit” button.

A user can track their DSR balance on the Oasis Save home screen, and observe the accrual of interest in real-time!

A DSR balance may be deposited or withdrawn at any moment, with no quantity or time constraints.

What problem does the DSR solve?

Stablecoins such as Dai offer value in the form of price stability. In the case of Dai, tokens are pegged to the US Dollar, meaning 1 Dai = 1 USD.

In order to ensure this, MakerDAO needs some influence over the supply and demand of the Dai token.

For some time now, MakerDAO has had an influence over the supply of Dai, via Stability Fees – or an annualized debt incurred on the creation of new Dai. Until now, however, there has been no influence over the demand of Dai.

By offering a low-risk investment tool for Dai tokens, MakerDAO has created a means of influencing the demand side of the Dai market, improving control and stability of the Dai token.

What makes the DSR unique?

The DSR contract is distinctly different from most other interest-generating protocols such as Compound Finance, in the sense that it is not a “lending” contract.

Although a user’s Dai is still locked into a smart contract, there is no counterparty on the other end to borrow the Dai tokens.

Whereas lending platform interest rates are decided upon via internal lending and borrowing demand, the DSR rate is determined via governance by MKR holders.

The DSR smart contract has no minimum requirements for the quantity of tokens or lock-up time. Since there is no counterparty borrowing tokens, a user never needs to wait for loan repayment before retrieving their deposit.

When was the DSR launched?

Although MakerDAO and the Dai stablecoin were officially launched in late 2017, the DSR was only introduced in November 2019. The feature was part of a large upgrade, which was centred around the release of Multi-Collateral Dai.

MakerDAO itself was founded by Rune Christensen, who is also the current CEO of the project.

Unlike many other platforms, MakerDAO did not hold an ICO. Instead, MKR tokens were sold over a lengthy period of time to forum members and to private investors, including prominent names such as Andreessen Horowitz, Polychain Capital, and Wyre Capital.

Why use the DSR?

To date, the DSR has offered a very good risk-to-reward ratio.

Unlike other protocols, the DSR interest rate is not directly determined by the risk involved, nor the demand for borrowing Dai.

It is currently ranked as one of the “safest” DeFi income opportunities by the DeFi Score and is largely seen as the Risk-Free Rate in DeFi.

The smart contract involves significantly less risk factors than most DeFi lending platforms, due to its simplicity. There is no counterparty borrowing Dai from the DSR contract, and it could also be argued that the Maker protocol poses less centralization risk than many of the newer platforms currently available.

The combination of the two above traits gives the DSR very unique value proposition – providing historically excellent returns, with relatively insignificant risk.

How to Get involved?

To stay up to date with all the latest about the DSR or wider MakerDAO project, follow them on Twitter.

Their official blog is also great for in-depth posts and information on new releases.

For active discussion, join the official Maker chatroom, or their Telegram channel.