sDAI Pool on Aave

Aave v3 Adds sDAI Pool

Aave v3, the leading decentralized lending protocol, has announced the launch of a new pool for sDAI, a token that represents DAI stablecoins deposited in MakerDAO’s DAI Savings Rate (DSR) module. The pool allows users to use sDAI as collateral and earn interest on their deposits. Aave’s Marc Zeller noted that sDAI’s yields enable delta-neutral lending on the protocol.

MakerDAO Boosts and Cuts DSR Yields

The news comes after MakerDAO, the decentralized autonomous organization behind DAI, increased the DSR from 3.3% to 8% on Aug. 6 in an effort to drive up adoption of DAI through Spark Protocol, a DAI-focused fork of Aave v3 launched by prominent MakerDAO community members in May that offers depositors access to the DSR. The increase was a success, adding more than $1B to the DSR’s total value locked (TVL) and maxing out Spark’s debt ceiling by Aug. 19.

However, the spike in TVL also triggered a reduction in DSR yields from 8% to 5.8%. The DSR’s TVL slumped from nearly $1.5B to $1.12B after the rate was reduced and has since rebounded to $1.26B, according to Dune Analytics.

MakerDAO Founder Proposes Rate Overhaul

Rune Christensen, MakerDAO’s controversial co-founder, proposed further lowering the DSR’s maximum yield to around 5% just 48 hours after yields increased to 8%. Christensen argued that “massive” whales disproportionately benefited from the rate hike through recursive lending, crowding out the regular DAI users whom Maker had hoped would benefit from higher DSR yields.

“Overall, I think we can consider the experiment a success, but I want to propose some changes aimed to ensure that the EDSR benefits regular DAI holders rather than disproportionately benefit ETH whales,” Christensen said.

Christensen proposed limiting DSR yields to 5% alongside a corresponding increase in borrowing rates across Spark Protocol and Maker’s vaults (excluding its ETH vaults) to prevent whales from engaging in recursive lending. Christensen also suggested introducing a “retroactive subDAO farming airdrop” to reward early Spark Protocol users and offset the blow of increased borrow rates. Christensen said he will publish a separate proposal outlining further details regarding the SPK airdrop at a later date.

Steps:

To participate in the sDAI pool on Aave v3, follow these steps:

1. Connect your wallet to Aave v3.
2. Deposit some DAI into MakerDAO’s Oasis app and activate the DSR module.
3. Receive sDAI tokens in your wallet at a 1:1 ratio with your deposited DAI.
4. Go back to Aave v3 and select the sDAI pool.
5. Choose whether you want to deposit or borrow sDAI and follow the instructions on the screen.
6. Confirm the transaction and enjoy earning interest on your sDAI or using it as collateral for other assets.