Maker DAO Community Votes to Implement EDSR Via GOV12.1.2

The Maker DAO community has voted to introduce the Enhanced Dai Savings Rate (EDSR). The voting, which was performed through GOV12.1.2, will temporarily increase the effective DSR available to users in the early bootstrapping stage when DSR utilization is low.

As posted on the Maker DAO forum, The EDSR is determined based on the DSR and the DSR utilization rate and decreases over time as the utilization increases. As utilization increases, it decreases and eventually disappears.

A member of the Maker DAO community identified as Rune submitted the EDSR proposal on July 19, 2023. He described the EDSR as a one-time, one-way temporary mechanism. That implies that the EDSR can only decrease over time. It cannot increase again even if DSR utilization goes down.

Rune explained in the proposal that they have managed to stabilize the total Dai supply. That was possible after setting the DSR to be among the highest values in decentralized finance (DeFi). However, they could not generate sustainable growth in new demand and capital inflows.

According to Rune, the essence of the proposed EDSR is to help fix the comparatively low adoption rate of the DSR. It aims to achieve this by ensuring Dai holders pioneering the DSR adoption gets a fair amount of value from the increased returns the protocol would generate.

Rune believes the new proposal, when implemented, would help spur the adoption of Maker DAO and push other DeFi protocols into quickly integrating the DSR. Even then, many of the users on Maker DAO would remain with the protocol due to the enormous cognitive switching costs of DeFi.

Maker DAO’s native token, MKR, has been in a significant uptrend since bouncing off the $511 low on June 10. The DeFi protocol’s token gained about 150% and traded at $1,230 at the time of writing.