sDAI Pool by Aave has officially launched, offering users an alternative source of yield after MakerDAO reduced yields. With the recent changes made by MakerDAO, Aave’s sDAI Pool provides an enticing opportunity for individuals looking to earn attractive returns. Stay updated with the latest developments in the DeFi space and benefit from Aave’s new yield offerings.
Aave Introduces sDAI Pool as DSR Yields Decrease
Aave has recently announced the launch of the sDAI pool in response to the decrease in DAI Saving Rate (DSR) yields. The DSR was initially set at 3.3% before being raised to 8% and subsequently reduced again. Rune Christensen, the Co-Founder of MakerDAO, has suggested further lowering the DSR yields due to the fluctuating Total Value Locked (TVL).
According to a report by Dune Analytics, the TVL of DSR currently stands at $1.26 billion. Since the rate was increased in early August 2022, the sDAI TVL has reached $900 million. However, the situation has changed in recent days.
With the release of Aave v3, users can now deposit yield-bearing DAI as collateral. This update quickly caught the attention of users, leading to $37 million worth of sDAI deposits within the first 24 hours of the launch, all on Aave v3.
The significant increase in yield from 3.3% to 8% by MakerDAO, with the help of Spark Protocol, boosted the adoption and resulted in the TVL of DSR surpassing $1 billion within a few days. However, this rapid growth in TVL was short-lived as Spark Protocol reached its debt ceiling just thirteen days later, causing the yield to be reduced to 5.8%. As expected, the TVL also decreased alongside the yield.
While the TVL initially dropped from $1.5 billion to $1.12 billion, it later recovered and currently sits at $1.26 billion. Dune Analytics’ findings do not provide any insights into how the TVL managed to increase despite a decrease in yield.
Rune Christensen mentioned that whales greatly benefited from the increased yield in a disproportionate manner, contrary to the original intention of benefiting regular DAI users. Although considered a successful experiment, Christensen proposed further reducing the rate to 5% in order to balance the interests of different stakeholders. This can be achieved by increasing borrowing rates across Maker and Spark Protocol vaults, excluding ETH vaults, with the aim of discouraging whales from participating in recursive lending.
Looking ahead, early Spark Protocol users may expect a retroactive subDAO farming airdrop. Christensen also suggested efforts should be made to mitigate the impact caused by the increased borrowing rates.