MakerDAO votes on higher DAI rewards

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Written by

William Miller
Published on

November 29, 2022


Key points:

  • The community of MakerDAO is voting to increase the annual reward on its DAI stablecoin to 1%.
  • The vote came as DeFi yields fell as interest in crypto lending fell.
  • Rewards are likely to increase as Maker increases revenue by deploying the strategy that includes working with institutional investors such as Coinbase and deploying a variety of return-generating investment strategies, including investing in traditional assets such as government bonds. 

Community members have until Dec. 1 to conduct a leaderboard vote to increase the so-called DAI savings rate to 1%, 0.75%, 0.5%, or 0.25% or keep it unchanged from the current 0.01%. MakerDAO began voting on Monday.

At the time of publication, all votes were in favor of raising the rate to 1%. That could change as more voters cast their preferences.

The vote came as decentralized finance (DeFi) yields fell as interest in crypto lending fell. At the same time, against the background of the Federal Reserve’s aggressive interest rate hikes, yields in traditional markets have risen sharply, exacerbating capital flight from DeFi.

For example, investors in USDC, the second-largest stablecoin, can earn a little over 1% annually by lending out their holdings. That's a much lower annual rate than investing in U.S. Treasuries, which return about 4 percent and are considered the least risky asset class.

Revenue of MakerDAO

Rewards are likely to increase as Maker increases revenue by deploying some of its $7.7 billion in reserves. The strategy includes working with institutional investors such as Coinbase and deploying a variety of return-generating investment strategies, including investing in traditional assets such as government bonds.

Sebatien Tweet

Earlier this month, prominent MakerDAO contributors Sebasien Derivaux and Sam MacPherson suggested that some of the newly earned income should be redistributed to DAI holders to make the stablecoin more attractive to cryptocurrency investors.

MacPherson noted in a tweet that as Maker increasingly invests in assets other than digital assets, it could present an opportunity to capitalize on rising yields in traditional markets while reducing capital outflows from cryptocurrencies.

“Banks offer risk-free returns over 4%. We should too,” he tweeted.

Sam Mac Pherson Tweet

In a forum discussion earlier this month, Derivaux said that increasing rewards would also make DAI more competitive compared to rival stablecoins.

“We might expect such a move to encourage USDC holders to switch to DAI lending,” Derivaux wrote in his proposal. “On the other hand, this will be a significant cost factor for MakerDAO.”


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