DAI Savings Rate — what, how and keeping track of interest income
TLDR; Towards the end of 2019, the Maker project released the next major update of their system — the Multi-Collateral DAI — usually abbreviated as MCD. An overlooked component of their system is the DAI Savings Rate (DSR) — a “risk-free” way of earning interest on your DAI stablecoin holdings. In this post, we’ll take a look at what the DSR is, how it works and how to keep track of your interest income.
The DAI Savings Rate (DSR) is a new feature of the Maker system that offers the holders of the DAI stablecoin an opportunity to earn interest income without additional risk. Before the DSR, if you held onto the DAI — it would just be sitting idle in your wallet not doing much.
One way of putting your DAI to productive use without trading or selling it is to deposit the DAI into a money-market protocol like Compound Finance or one of the other lending platforms. The problem is that you were then exposing yourself to additional smart contract risk from these external systems.
The DSR allows you to put your DAI to productive use with a native in-built feature of the Maker platform.
The difference — your risk is not any more than the risk within the Maker contracts because the DSR contracts have gone through the same set of rigor that the other Maker contracts have gone through. That’s why sometimes the DSR is called “risk-free” though it actually is “no extra risk.”
Additionally, the contracts have no limits on withdrawals/deposits or any kind of liquidity constraints.
You can deposit your DAI in your wallet at this very moment at the Oasis Save app. Once deposited, your DAI will continuously accrue interest based on the current interest rate.
To read more about DSR, head over to https://www.covalenthq.com/blog/2004-dai-savings-rate-tracking-interest-income/
