MakerDAO’s successful and highly-anticipated launch of Multi-Collateral DAI (MCD) brings many new and exciting features. Aside from supporting many collateral types and parameters, DAI is now eligible for the “DAI Savings Rate” (DSR), an opt-in, interest-bearing account supported by an official MakerDAO contract, paid for by the system’s stability fees (charged to Vault owners who have borrowed DAI). Holding DAI tokens is not enough to earn this DSR, these tokens must be deposited into a special contract.
Any time you are holding DAI in your wallet without depositing it into this DSR contract, you are giving up free, risk-less™️ returns on your DAI position. However, using DSR is not without its drawbacks, as the DSR account is not tokenized and cannot be easily traded, staked, or used as a standard payment mechanism.
DAI-HRD, a project released by Keydonix, allows you to benefit from the DSR without these drawbacks by wrapping your DAI DSR deposit into an ERC-20/ERC-777 token which deposits DAI into the DSR on your behalf. This token contract, called dai-hrd.eth, is trustless and ownerless, with no counter-party risk. All deposits, withdrawals, and transfers take place on the DAI-HRD smart contract, without any centralized services. DAI-HRD is your best way to earn interest on your DAI, while continuing to function as a standard token.
You can use the DAI-HRD dApp at https://dai-hrd.keydonix.com/ to wrap and unwrap your DAI into interest-bearing DAI-HRD tokens.
At Keydonix, we envision an ecosystem where smart contracts operate on DAI-HRD, instead of DAI itself. When you hold and transfer DAI as a stable store of value, you would do so using DAI-HRD. When you deposit your DAI into DeFi components such as Uniswap or 0x, you would use the DAI-HRD token, earning the DAI Savings Rate on these deposits while they are used in a DEX or as collateral.
Tokenizing interest-bearing DAI opens up a world of compounding opportunities.
DAI-HRD for holders of a stable asset
Many users of DAI hold onto the token as a stable asset, transferring and receiving value from various third parties. Often, the convenience of holding a token outweighs the desire to stake your tokens into the DSR, as deposit and withdrawal take many transactions, and knowing how much staked DSR to withdraw is tricky and changes every second. If holders wrapped all of their DAI in DAI-HRD, not only would they be earning the DSR on their entire deposit, but using a single function on DAI-HRD would allow them to send unwrapped DAI to a third party in a single transaction, as the contract takes care of calculating how much DSR is appropriate to withdraw to support that exact DAI value transfer.
While holding a DAI-HRD balance, the amount of DAI you can withdraw increases every block. Withdrawing back into DAI is reduced from 4 separate transactions into a single transaction.
You will continue to earn interest on the DAI-HRD you hold after after withdrawing, but the DAI being sent to another user is unwrapped and no longer accrues interest for that party. If the other user you are sending value to accepts the DAI-HRD token itself (as it is trustlessly backed by a specific amount of DAI at a point in time), you can transfer the DAI-HRD tokens themselves and neither the sender nor the recipient ever stop accruing interest! The longer the native DAI-HRD transfer transaction takes to mine, the more interest the sender accrues and keeps. The sooner the transaction mines, the more interest is granted to the recipient.
DAI-HRD for DeFi
In the same way two parties can transfer DAI-HRD natively, without withdrawing to DAI, DAI-HRD can also be used in the broader DeFi ecosystem to continually accrue the DAI Savings Rate, even while DAI token value is staked in ANOTHER DeFi component. Take Uniswap for example: There is already a DAI:ETH Uniswap market, but those liquidity providers are staking an asset that is NOT accruing interest. If instead, those users wrapped their tokens with DAI-HRD and provided liquidity to the DAI-HRD:ETH Uniswap, they would be concurrently earning DSR interest AND Uniswap trading fees. Additionally, users who trade these tokens are also given an interest-bearing asset that can be trustlessly unwrapped for more value than it was worth when it was acquired.
As big fans of the Uniswap project, Keydonix has created and provided initial liquidity to the DAI-HRD:ETH Market and we invite others to do the same!