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Breaking News: LINK Price Climbs Following Chainlink's Deal With US Commerce Department, Eyes $30

MakerDAO Debates New EDSR Optimization Plan As MKR Bears Retain Market Control

Semilore Faleti
Semilore Faleti
1 year ago
3 mins read
MakerDAO

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MakerDAO has been in the headlines recently following a boost in the maximum Dai Savings Rate (DSR) from 3.19% to 8% on Sunday, August 6. This temporary increment termed the Enhanced Dai Savings Rate (EDSR), was designed to encourage more Dai (Maker’s stablecoin) holders to deposit their tokens on the Maker protocol and earn interest.

Following the implementation of EDSR, the Dai token has experienced some traction, with its market cap rising by over $570 million since Sunday, according to data from CoinMarketCap. 

In addition, data from the Makerburn dashboard shows the number of DAI in the DSR program has surged, moving 396.8 million on August 6 to its current value of 906.7 million. 

However, amidst the massive success of the EDSR, MakerDAO co-founder Christen Rune has proposed to adjust this incentive plan “based on observed data.” 

MakerDAO Co-Founder Proposes EDSR Optimization Plan To Curb ETH Whale Dominance 

On August 8, Rune submitted a governance proposal on the MakerDAO forum to optimize the Enhanced Dai Savings Rate citing an ongoing ETH whale dominance over regular Dai holders in terms of the program’s benefits. 

Related Reading: Maker (MKR) Signals Bullish Price Formation – Is $1.300 Around The Corner?

According to Rune, offering yields on Dai that are higher than the cost of borrowing Dai has led to certain borrowing activity known as “borrow arbitrage,” whereby traders borrow Dai at 3.19% and deposit in the EDSR program for 8% profit.

Rune noted that this was not the intended purpose of the EDSR plan. He stated that this investment strategy was mainly practiced by ETH and staked ETH whales, who now receive a higher yield at the expense of regular Dai holders,  the primary target of the EDSR program.

To counter this unforeseen circumstance, Christen Rune proposed to reduce the maximum EDSR interest rate from 8% to 5%. Furthermore, the MakerDAO cofounder proposes an increment in the DAI borrowing rate to be equivalent to the EDSR rate at a minimum of 5%, thus halting the ongoing large-scale “borrow arbitrage” activities.

The proposal also states that MakerDAO should extend Tier 1 EDSR to cover a utilization range of 0-40% and introduce a Tier 2 EDSR for utilization between 40-55% with the aim of making the EDSR plan sustainable. 

For context, utilization refers to the portion of the total capacity of the EDSR system that is in use. Currently, data from Makerburn states that the EDSR has an 18% utilization rate. 

Originally, the EDSR maximum yield was meant to drop to 5.8% once utilization surged to 20%, albeit that would not occur upon approval of Rune’s latest proposal. 

Maker (MKR) Maintains Bearish Form Amidst ESDR Success

In other news, MKR, the native token of the MakerDAO lending protocol, has seen its market price fall in recent days despite the massive boost in DAI’s market shares. 

According to data from CoinMarketCap, MKR’s price is down by 0.84% in the last 24 hours. This price drop adds to the token’s prolonged bearish state, whereby it has lost over 8.26% of its market value in the last seven days. 

Related Reading: Record-Breaking $10 Billion Open Interest Fuels Bullish Speculation For Bitcoin Reversal

During this period, MKR’s price declined from $1,339.22 on Aug.3 to as low as $1,187.66 on Aug.7. However, most MKR investors still likely retain faith in the DeFi token, which boasts of a positive monthly performance gaining by 32.30% in the last 30 days.

At the time of writing, MKR is trading at $1,214.28, with a 0.39% loss in the last hour. With a market cap of $1.18 billion, the token is ranked as the 42nd largest cryptocurrency in the market.

MakerDAO

MKR trading at 1,214.7 on the hourly chart | Source: MKRUSD chart on Tradngview.com
Featured image from Binance Academy, chart from Tradingview.
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Semilore Faleti
Semilore Faleti

Semilore Faleti

Semilore Faleti is a cryptocurrency writer specialized in the field of journalism and content creation. While he started out writing on several subjects, Semilore soon found a knack for cracking down on the complexities and intricacies in the intriguing world of blockchains and cryptocurrency.

Read more

Semilore is drawn to the efficiency of digital assets in terms of storing, and transferring value. He is a staunch advocate for the adoption of cryptocurrency as he believes it can improve the digitalization and transparency of the existing financial systems.

In two years of active crypto writing, Semilore has covered multiple aspects of the digital asset space including blockchains, decentralized finance (DeFi), staking, non-fungible tokens (NFT), regulations and network upgrades among others.

In his early years, Semilore honed his skills as a content writer, curating educational articles that catered to a wide audience. His pieces were particularly valuable for individuals new to the crypto space, offering insightful explanations that demystified the world of digital currencies.

Semilore also curated pieces for veteran crypto users ensuring they were up to date with the latest blockchains, decentralized applications and network updates. This foundation in educational writing has continued to inform his work, ensuring that his current work remains accessible, accurate and informative.

Currently at NewsBTC, Semilore is dedicated to reporting the latest news on cryptocurrency price action, on-chain developments and whale activity. He also covers the latest token analysis and price predictions by top market experts thus providing readers with potentially insightful and actionable information.

Through his meticulous research and engaging writing style, Semilore strives to establish himself as a trusted source in the crypto journalism field to inform and educate his audience on the latest trends and developments in the rapidly evolving world of digital assets.

Outside his work, Semilore possesses other passions like all individuals. He is a big music fan with an interest in almost every genre. He can be described as a “music nomad” always ready to listen to new artists and explore new trends.

Semilore Faleti is also a strong advocate for social justice, preaching fairness, inclusivity, and equity. He actively promotes the engagement of issues centred around systemic inequalities and all forms of discrimination.

He also promotes political participation by all persons at all levels. He believes active contribution to governmental systems and policies is the fastest and most effective way to bring about permanent positive change in any society.

In conclusion, Semilore Faleti exemplifies the convergence of expertise, passion, and advocacy in the world of crypto journalism. He is a rare individual whose work in documenting the evolution of cryptocurrency will remain relevant for years to come.

His dedication to demystifying digital assets and advocating for their adoption, combined with his commitment to social justice and political engagement, positions him as a dynamic and influential voice in the industry.

Whether through his meticulous reporting at NewsBTC or his fervent promotion of fairness and equity, Semilore continues to inform, educate, and inspire his audience, striving for a more transparent and inclusive financial future.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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