MakerDAO Unveils Innovative Strategies To Reignite DAI Demand

Key Points:

• MakerDAO implements EDSR to increase demand for DAI stablecoin amid a circulation drop.
• DAI holders may earn up to 8% interest as MakerDAO backs DAI with yield-generating assets.
• Spark Protocol expands, achieving a record 14.44 million DAI tokens borrowed on Ethereum.

MakerDAO, a major decentralized finance (DeFi) lending protocol, has taken decisive actions to stimulate demand for its DAI stablecoin, which currently holds a total value of $4.6 billion.

In response to the stablecoin’s circulation shrinking by a third, falling from $6.9 billion in the past year, the MakerDAO community recently conducted a governance vote to introduce the Enhanced DAI Savings Rate (EDSR). This move is aimed at boosting interest rates for DAI holders, potentially providing returns as high as 8%.

The wider stablecoin market, which plays a vital role in providing liquidity for the crypto ecosystem’s trading and transactions, has also experienced a downturn, decreasing from nearly $160 billion to $127 billion compared to a year ago.

To make DAI more appealing to investors, MakerDAO has been backing the stablecoin with yield-generating assets, including government bonds. A portion of the revenue generated from these assets is passed on to DAI holders. Last month, the protocol raised the DAI Savings Rate (DSR) to 3.49%, intending to enhance its attractiveness when compared to rival stablecoins that do not offer similar rewards. However, the current amount deposited in the DSR stands at only $306 million, which is less than 7% of the total DAI supply.

Recognizing the need to generate sustainable growth in new demand and capital inflows, MakerDAO’s founder, Rune Christensen, acknowledged the challenge in a governance forum post. He emphasized the significance of the EDSR in addressing this issue, ensuring that early adopters of the DSR receive a fair share of value from the increased returns generated by the protocol.

The interest rate under the EDSR will be determined based on the volume of deposits in the DSR facility and the base reward rate. As usage of the protocol increases, the EDSR rate will gradually decrease, encouraging higher adoption.

In addition to efforts to boost DAI demand, MakerDAO has made strides by expanding its DeFi lending protocol, Spark Protocol, to multiple blockchain networks. The team has also outlined the process of implementing Spark Protocol on specific domains within each blockchain network. Notably, Spark Protocol has achieved a historical high in DAI lending volume, with an impressive 14.44 million tokens borrowed. Serving as Maker’s MetaDAO, Spark Protocol enables the borrowing and lending of decentralized tokens on the Ethereum network.

These strategic initiatives by MakerDAO aim to reinvigorate demand for the DAI stablecoin and maintain its pivotal role in the dynamic DeFi landscape. The success of these measures could have far-reaching implications for the overall stability and liquidity of the broader crypto ecosystem.

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