[Signal Request] - Increase the DSR

Hi Everyone,

Currently the DSR is set to 0.01% and the protocol has approx. 800MM of USDC / other stablecoins in the system.

In parallel, we are seeing significant expansion of the ETH-A/B/C Vaults. Further, we have Real World Assets coming online as a seeming drumbeat of new DAI.

While USDC / stablecoins still exist in the system, from my lens, I believe we should start a “twist” of monetary policy of both increasing the DSR to encourage savings of DAI (and thus reducing the circulating supply) and also routinely increasing it incrementally (probably on a quarterly basis).

The net effect of a ratcheting effect (increasing) on the DSR mixed with new DAI from Real-World Asset should cause a new allocation of “savers” that use DAI as an alternative to the banking sector.

Further, the more we ratchet up the DSR, the closer we start to rate-match the existing banking sector AND then surpass it.

The above “twist” is a medium-term horizon plan (over the course of the coming months / year) that should ideally continue until the DSR is well above 150bps (maybe even 200bps).

Benefits of increasing the DSR:

Attract a new sector of DAI savers (and finding a home for all of the new DAI)
Start to rate-match the existing banking sector all while having a minimal impact to the surplus buffer

To help provide a clear signal, please try to vote in all of the below polls.

Should we increase the DSR (in general)?
  • Yes
  • No
  • Abstain

0 voters

If you voted yes in the above poll, should we continually ratchet-up the DSR in small increments?
  • Yes
  • No
  • Abstain

0 voters

If you voted yes to increase the DSR, do you support a current increase to 25bps (so a net increase of 24bps)?
  • Yes
  • No
  • Abstain

0 voters

If you voted no, please reply in the thread below to start the discussion and help identify consensus on when / how much an amount would be (informally) so a substitute signal request may be structured.

This poll will run until Monday May 15. If a majority of forum voters (excluding abstain voters) support changing the the DSR, I’ll follow up with an on chain governance poll for the selected parameter update.


I voted no based on the wording of the second poll. I’m not sure continually increasing is necessarily good depending on market circumstances (seems too blanket statement in my opinion). I do agree with increasing it by 24bps right now though.

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I’m keen to raise DSR in general, but currently we don’t have a DAI demand problem. Even with RWA coming along, we have a DAI supply problem. Maybe in 3-6 months, RWA will be contributing a larger share of the fees.

Isn’t the PSM the limiting factor? How much are we earning per DAI per year from the PSM? I don’t think we should raise the DSR substantially until the PSM is mostly emptied out.


I simply think the demand for DAI is too high relative to supply. I’m not opposed to the intended operation, but the yield on DAI in various places makes me worry about market disruption.

I’m open to being persuaded otherwise

Thanks for this Signal Request @mrabino1 – I voted yes, but I do see your logic Josh–the PSM earnings are more than likely not enough. I do miss the days of using the DSR contract directly. Perhaps why I want to restart it. 25 basis points is not much, but it’s better than most banks in the U.S. and EU will pay out.

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Hi @mrabino1 ,

a tripple x Abstain for me.
Reason: Would it be possible to reword this (otherwise excellent) signal to
“Get Risk/RWF to analyse the consequences of a DSR intended to compete with fiat banks” ?

I feel our pros should get a chance to have input first. Cheers!


I’m voting no across the board because I believe that increasing this parameter before we’ve completely eliminated the need for other stablecoins in the system is counterproductive - i.e. it will only cause more stablecoins to enter the system.


I would challenge that with as long as stablecoin exposure is on their way down, there is the possibility that starting when it is at zero might be a bit late…hence the concept of starting earlier…

Why do you say so?

This is a completely fair point… The key here is the pace (e.g. velocity) at which stablecoins are exiting the protocol.

I can see that point, but I think it’s really premature to even think about it. I’d say this is a “last $100M” issue.

Just because the protocol in printing loads of cash, funding internal teams and external grants, and generally kicking ass doesn’t mean that we should start spending money as fast as possible. It’s okay to be an incredibly profitable protocol. Just relax into that glowing success like a warm jacuzzi.

It’s a chance to institute banker hours, not to increase the speed of the treadmill.

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I voted NO, NO, NO for the same reasons.

The PSM saved us from peg deviation, but the DSR will provide additional upward pressure on the value of DAI.

While I think the PSM will be one of the top features for DAI in the next years, I think currently we are not in a position of introducing it (assuming we don’t want DAI to become a USDC wrapper).


I agree we need to increase the DSR.


  • After having something to do with the USDC. Currently, we don’t do anything. Providing it to a stablecoin liquidity pool is low risk. But that would need a lot of SC work anyway. If we can have a 2% yielding investment that’s fine.
  • I would prefer to increase the DSR to 2% directly. Better PR impact and Business Dev have signed some partnerships that kick in when we have a 2% DSR.
  • We need to have a real strategy. i.e. we need to push CHAI. Provide liquidity for that. Interface it on 1inch.

It’s a lot of money. At the same time, it can be a game-changer.

@Planet_X , thanks for sending work my way :slight_smile: Actually, it’s super interesting. I’m currently working on thinking about how much liquidity we need (but we have too much that quite sure) and what liquidity means. Then I want to touch on a steablecoin clearinghouse idea that might increase DAI demand and put DAI on the top of the stablecoin hierarchy (because what else?). Actually, DSR is always present.

If there is a strong sentiment on increasing DSR, I sure will prioritize accordingly.

Fat margins are temporary, we will have to increase the DSR anyway. Doing it preventively might be smart for growth, but maybe not today.


I am a no for multiple reasons.

  • DAI demand is still extremely high. In fact we are getting ETH liquidations occuring (seriously?!).
  • Please show me the data that stablecoins are exiting the system because I am not seeing this.
  • PSM still exists and is open. This is my primary beef here is that the PSM for PEG management completely mucks up the proper behavior between SF and DSR. I can’t get a clear handle on demand and supply because of this except by looking at other market rates for DAI supply.
  • DAI return >2% can be had elsewhere, compound, AAVE, DYDX, etc. etc… (which is also driving demand - is even 2% going to compete and even if it did all this is going to do is drive DAI demand upward).

One thing I don’t think people realize and this is because we are basically leaving the PSM DAI price liquidity downside open with full liquidity at a single price is that it might be nice to have some USDC in reserve in case DAI demand dries up over a short period of time and that 500M is eaten overnight.
Sure we can raise SF to sop up demand but borrowers have to be able to unwind to take advantage of this. Once this PSM USDC backing dries up it is a free fall DAI PEG to downside unless people have USDC or other assets they want to sell to buy DAI. Which is another reason not to SF bully our USDC LP providers - they may end up being a significant backstop to DAI price dropping - where as RWA and other borrowers may not find themselves in positions to significantly sop up DAI liquidity.


You can even get 2% for DAI on Coinbase. That shows the extent of the issue of how we need to focus on the supply side rather than demand

Coinbase… lol really.

Here is my short list of current.

DYDX pretty consistent > 6%
AAVE 3.5%
UNISWAP USDC-DAI LP (paired with USDC) ~6% (current number) I just happened to look at the pair product change since inception of this pair (345 days ago) and this has earned 11.65% on the total value in the LP over lifetime if I am doing my LP return math properly.

BTW if you want to look at centralized.
NEXO paying 8-10% on DAI and USDC currently.

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That’s the joke. But it also drives the point home, because you know they’re just borrowing short from their customers while lending long. We have a yield curve. There’s that much demand for DAI.

At most I would agree to raise the DSR to 0.25%. 2% seems way too high and not necessary at the moment. Nexo and Blockfi offer much higher rates which basically defeats the whole point of raising interest rates.

My thinking is the slow ratchet… It is not really intended to move the needle today. Though with sustained push it would. The catch is that we need to time this with surges of newly minted DAI (or scaled RWA coming online). Since we cannot predict that per se, my view is that starting in small increments.

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