How to participate in the analysis of the income source of the 8% annualized interest rate of the DAI stable currency?

Original Author: @Cook 0x

This article will detail the source of income at an annualized interest rate of 8%, and what are DSR and EDSR. Since MakerDAO does not have an official deposit page, we will also introduce 4 locations and steps to implement $DAI deposits.

First of all, do a conceptual science: MakerDAO's DSR is - Dai Savings Rate, which can be simply understood as the deposit rate of the stable currency $DAI, and the income can be automatically obtained by putting $DAI in the deposit contract, which is equivalent to the demand deposit in the real world.

Strictly speaking, the 8% interest rate proposed this time is a new mechanism EDSR - Enhanced Dai Savings Rate, which is an enhanced version of the current interest rate model.

Let’s talk about the source of income first. We all know that the 8% yield has exceeded the income of U.S. Treasury bonds and other high-quality investment targets, so is it a real income?

First of all, it is a temporary interest rate, which is calculated in steps. EDSR (Enhanced Dai Savings Rate) is a measure that temporarily increases user deposit incentives when DSR utilization is low. EDSR is determined based on DSR utilization and gradually decreases as utilization increases.

What is the utilization of DSR?

Simply put, it is the ratio of the amount of $DAI deposited in DSR to the total amount, which means that as more $DAI is deposited in DSR, the interest rate will gradually decrease.

As shown in the figure below, when the utilization rate is <20%, the interest rate is 8%. When the utilization rate is >50%, the interest rate will drop to 4.16%.

It is also important to note that EDSR is a one-time, one-way temporary mechanism, which means that EDSR can only decrease over time, and cannot increase again even if DSR utilization decreases.

Simply put, 8% may only have this one chance.

After the above analysis, I have basically understood the source of 8% of the income. The principle is that assuming that 100% of MakerDAO’s stablecoin assets are bought in RWA, then less than 20% of $DAI is receiving income, so the overall yield is overflowing , this part constitutes the source of "8% > treasury bond income". (The specific real data needs to be accurately calculated here) It is equivalent to reducing the income of DAO itself, and then distributing it to depositors of $DAI.

How to operate? - DeFiSaver (Smart Saving)

• Select Maker DSR in [Smart Saving];

• Enter the amount to deposit in Supply;

• Estimated weekly/monthly/yearly earnings are shown on the right.

How to operate? - DeFiSaver (Spark)

• Switch the currency to $DAI in Spark's Supply window;

• Provide DAI and convert it into sDAI, which can be used for collateral borrowing;

• Spark is a lending agreement under MakerDAO. sDAI is equivalent to aDAI in Aave, which is equivalent to borrowing while getting the deposit rate of DSR.

How to operate? -SummerFi

• Select Maker on the Earn page, and the subsequent operations are similar to DeFiSaver.

How to operate? -chai.money

$CHAI can be understood as a packaged token, which can automatically help you accumulate the principal and interest of $DAI in DSR.