- MakerDAO is moving to drive adoption for DAI.
- The DAO’s latest initiative involving the DSR and Spark Protocol appears to be yielding results.
- Maker is restricting access to Spark Protocol, but there may be workarounds.
MakerDAO had made its intentions of revolutionizing lending for DAI users clear with the launch of Spark Protocol in February 2023. But the DAO’s efforts have not stopped there.
As part of its latest initiative to increase demand for DAI, the protocol has temporarily increased the DAI Savings Rate (DSR)—interest earned on DAI deposits in DSR contracts accessed through Spark Protocol—to 8%. In just over 24 hours, the move has yielded incredible results.
DAI Demand Skyrockets
In a tweet on Monday, August 7, MakerDAO highlighted that demand for DAI on Spark Protocol had skyrocketed by 248%, with users borrowing 49 million DAI in just 24 hours after the DSR was temporarily raised to 8%.
With the recent growth in demand, DAI borrowings on Spark Protocol have now surpassed $100 million, sitting at $118.15 million, per the website at the time of writing. At the same time, DAI’s market capitalization has jumped over 10% from $4.44 billion to $4.94 billion at press time, per data from CoinMarketCap.
MakerDAO creator Rune Christensen introduced the Enhanced DAI Savings Rate (EDSR) proposal to increase the DSR in July 2023. Following community approval on August 4, MakerDAO implemented the rate change on Sunday, August 6.
Christensen has asserted that the DSR would be reduced later when more users adopt the contracts, highlighting that only 8% of DAI users utilized DSR contracts.
While the move to increase the DSR currently appears to be achieving its goal of attracting new users, the feedback has not been entirely positive. Some users have raised issues with the protocol’s stance on excluding U.S. and VPN users.
No U.S. Residents Allowed?
Announcing the increased DSR, Christensen noted that Spark Protocol would be inaccessible to U.S. residents and VPN users.
The disclaimer did not rub off well on some crypto community members. One user who asserted he was a South American resident questioned why he had to relinquish his privacy to use the platform. Another user poked holes at the logic of exempting users from the U.S. for a dollar stablecoin.
Still, others have asserted that the move by MakerDAO is just for appearances, as users can bypass the Spark Protocol and interact with the contracts directly. A member of the BowTiedBull team even offered to teach users how to go about bypassing the restrictions.
The recent restriction comes amidst rising regulatory uncertainty in the U.S., with the SEC particularly frowning on yield-bearing crypto products.
On the Flipside
- It remains unclear how MakerDAO plans to maintain this momentum when the DSR is reduced.
- MakerDAO’s DAI faces competition from Aave’s recently launched GHO stablecoin.
Why This Matters
DAI is already the largest decentralized stablecoin. The decision to raise interest earned on DAI deposits could significantly increase its adoption and tighten the competition with centralized alternatives like USDC and USDT.
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