DAI One Step Closer To Real Money?

Editor's Note: This article is from:DeBankView (ID: DeBankView)Editor's Note: This article is from:

DeBankView (ID: DeBankView)

DeBankView (ID: DeBankView)

, Author: Jorge S, reproduced by Odaily with authorization.

MakerDAO recently released its most significant update since launch, introducing the DAI Deposit Rate (DSR) in addition to officially supporting Multi-Asset Collateralization (MCD). MakerDAO has high hopes for it, claiming that DSR will change the rules of the game in the DeFi ecosystem. Can it really release such a large amount of energy?

DSR as risk-free return

The so-called DSR, DAI Saving Rate, is also the DAI deposit rate, the meaning is very easy to understand: MakerDAO provides a savings contract, users only need to deposit their own DAI to obtain an annualized 2% interest income. It is not difficult to speculate why MakerDAO launched this function, incentivizing users to buy and hold DAI.

Since its launch, there has been no effective incentive to receive and hold DAI compared to creating a CDP to lend DAI. Mortgaging ETH to lend DAI can meet the needs of users on the chain to increase leverage, and it also provides a solution for many project teams that have raised ETH but need to use legal currency to pay for expenses. However, the other side of the transaction is to receive and hold DAI. people, but did not gain any benefits, but may have to bear a certain liquidity loss (compared with USDT, DAI's liquidity still has a very large gap).

The success of mortgage lending platforms such as Compound and dYdX has undoubtedly led MakerDAO to find a solution. We can see that since their emergence, these mortgage lending platforms have effectively absorbed a large amount of savings by providing depositors with interest.

It is not surprising that MakerDAO adopts such a measure that has been proven effective by the market. However, compared with lending platforms such as Compound and dYdX, DSR has three significant differences:

First, there is no run risk. Lending platforms such as Compound will lend users' deposits to other users. In extreme cases, if the fund pool is depleted, depositors will not be able to redeem their own liquidity. However, DSR does not lend users' deposits, and the DAI obtained by borrowing users does not come from DSR deposits, which eliminates the risk that depositors cannot redeem liquidity in real time.

Second, there is no counterparty risk. Similar to the previous point, since lending platforms such as Compound will lend out deposits, changes in the mortgage status and solvency of loan users will also bring new risks to depositors.

The third is that there is no platform risk. When users use lending platforms such as Compound, in addition to bearing the risk of holding DAI, they also have to bear the new risks introduced by the Compound platform itself. The DSR is officially provided by MakerDAO, and users do not need to bear additional third-party risks. That is to say, the risk of using DSR is equivalent to the risk of holding DAI, and there is no new risk increment.

In a sense, we can regard DSR as the risk-free rate of return of DAI. This is similar to defining the U.S. Treasury yield as the risk-free rate of the U.S. dollar, because holding U.S. Treasuries only needs to bear the risk of depreciation of the U.S. dollar without taking additional new risks. From this point of view, we can say that DSR is another big step for DAI to become a real currency. If DAI can really become the de facto currency in the DeFi ecosystem, then DSR will undoubtedly become a very important market indicator.

DSR as a price stabilization mechanism

In the updated white paper, DSR is clearly described as a "price stabilization mechanism". That is to say, like the stable rate, DSR will also be used as a tool to adjust market supply and demand. If the price of DAI is higher than If the price of DAI is lower than one dollar, the DSR will be lowered to suppress demand, and if the price of DAI is lower than one dollar, the DSR will be raised to stimulate demand.

Here we have to re-examine whether the price stabilization mechanism of DAI is effective enough. The stable currency can maintain a relatively stable price with the anchor currency, and its most basic logic comes from arbitrage. When the stablecoin price deviates from the anchor price, an arbitrage opportunity will appear, and the actions of arbitrageurs will pull the price back to the anchor price. Taking USDT as an example, if its price is higher than one dollar, arbitrageurs will exchange USDT through official channels and sell it in the market, thereby bringing the price back to one dollar, and if it is lower than one dollar, they will do the opposite. The arbitrage mechanism is very simple and effective, and the correction of price deviation can be realized efficiently.

On the other hand, when the price of DAI deviates from one dollar, arbitrageurs have no way to make immediate profits through operations such as lending and trading. The arbitrage behavior must wait until the price of DAI returns to one dollar before it can be finally completed. As for when the price will return to one dollar and whether it can return to one dollar, it is difficult to determine. Therefore, arbitrage risks and frictions are very high, and it cannot be used as the main means of stabilizing prices.

In fact, the price stability of DAI has always been achieved by adjusting the stability rate. Since its launch, the stable rate has been adjusted more than 20 times, ranging from 0.5% to 20.5%.

Before MakerDAO claimed that it would adjust the stable rate through governance in the early stage of launch, and gradually explored a reasonable adjustment mechanism during this process, and finally automated the adjustment of the stable rate. However, judging from the current situation, automation is still difficult to achieve. For a long time, the stable rate will only continue to rely on governance adjustments.

After adding DSR, MakerDAO will have the ability to adjust the deposit rate and loan rate separately. This flexibility will provide MakerDAO with a huge advantage in the competition with other platforms. At the same time, as the complexity of system regulation increases, automation becomes more difficult to achieve, and the quality and efficiency of governance behavior will affect the health of the entire system to a greater extent.

Changes in benefit structure brought about by DSR

Another question worth considering is who gets the benefits of the DSR. The income structure has not changed, some participants have increased their income, and the interests of others must have decreased. Intuitively, we may think that MKR holders are damaged. Originally, the interest (stability fee) paid by borrowers was distributed to MKR holders, but now a part of it is distributed to DSR depositors, so the share of MKR will naturally be small. But a closer look at the changes after this update reveals that this is not the case.