DAI Savings Rate Was Increased To 1% In December
A fallen large of crypto is about to make a significant deposit into DeFi’s oldest and largest lending protocol.
OlympusDAO, which goals to develop what it calls a “decentralized reserve currency” and was the poster little one of the ‘DeFi 2.0’ motion, has voted to deposit 77M DAI into MakerDAO’s DAI Savings Rate (DSR) module.
Maker, which points the DAI stablecoin towards overcollateralized debt positions, successfully restarted the DSR when it raised its charge to 1% from 0% in December.
Jennifer Senhaji, of Maker’s progress workforce, informed The Defiant that whereas a 1% yield would have been laughed at in 2021, occasions are totally different now, and OlympusDAO’s imminent deposit reveals that the restarted DSR strikes the needle.
‘Risk-free’
“This is actually really valuable for DeFi, particularly at this point in the market, because it’s essentially a risk-free yield,” she mentioned, clarifying that there’s no actual further danger in DSR deposits past holding DAI.
The stablecoin does have some dangers related to it — some of the typically cited criticisms is that DAI is partially backed by USDC, a centralized stablecoin which has blacklisted crypto addresses prior to now.
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The DSR was launched in November 2019 and noticed charges climb above 7% in 2020. Olympus’ proposal to deposit property into the DSR cited the module’s battle-tested code as a cause to belief it with $77M.
That determine constitutes over 75% of the challenge’s DAI, in keeping with a dashboard displaying Olympus’ treasury as of Jan. 27.
As is the norm in DeFi, Olympus doesn’t have to ask permission with a view to make the deposit. No members of the challenge even contacted anybody at Maker earlier than the vote, Senhaji mentioned.
Compound Integration
She added that Maker is in talks with Compound, a lending protocol with $1.6B deposited in its sensible contracts, to combine DSR underneath the hood to successfully add a share level of yield to customers supplying DAI on Compound.
The DSR comes with no lockups, so a challenge or consumer can withdraw their DAI from Compound at any time when they want. The protocol’s governance would wish to approve the DSR’s integration.
It wouldn’t be the primary time — in 2019, Compound built-in the DSR when the Maker module first launched.
2021 Yields Were ‘Delusional’
Olympus’ deposit comes at a time when a standard view in DeFi is that yields are down, and so open finance is now not helpful.
However, Andre Cronje, the controversial founding father of Yearn Finance, a yield aggregator and quintessential DeFi challenge, launched a submit arguing that the yields of 2021 have been successfully delusional.
“On every feasible metric, real yield and DeFi have grown substantially,” Cronje wrote.
Maker’s redeployment of the DSR could also be a part of the ‘real yield,’ based mostly on precise consumer exercise on lending and buying and selling protocols, that Cronje is arguing for.
Real World Assets
The collateralized debt protocol has been constantly pushing deeper into real-world asset (RWA) offers and makes use of income from these ventures to pay the DSR’s 1% charge.
While the yield isn’t a lot in comparison with U.S. Treasuries nowadays, the DSR charge is accessed by merely triggering a wise contract. This contrasts with the extra onerous technique of buying and selling crypto for {dollars} or counting on a custodial answer to entry Treasury yields.
The DSR can be safer than different yields in DeFi, a lot of which have been “rehypothecated,” Senhaji mentioned. Rehypothecation is when an asset which is posted by one entity as collateral to take out a mortgage, is then utilized by a lender to collateralize yet one more mortgage.
DeFi 2.0
No challenge has gone from being the subject of sizzling debate to close invisibility over the previous yr and a half fairly like OlympusDAO.
At one level, it was a figurehead of the short-lived ‘DeFi 2.0‘ movement, which focused on protocols owning their own liquidity. Ultimately, Olympus’ OHM token crashed over 90% from its highs to the extent at which its treasury totally backed it.
Despite Olympus’ fall from grace, the OHM token nonetheless has a market capitalization of $282M, in keeping with CoinGecko — that’s forward of different main DeFi gamers like decentralized exchanges SushiSwap and Balancer.
Maker’s MKR token has barely underperformed Ether this yr — it’s up 28% whereas ETH is up 31%, in keeping with The Defiant Terminal.
ETH Price + MKR Price + BTC Price + QQQ Price, Source: The Defiant Terminal
Maker’s reawakened DSR bought one other vote of confidence from Vitalik Buterin — Ethereum’s co-founder deposited over $279,000 into the DSR on Jan. 24.
