DAI Stablecoin Surpasses $5B Market Cap on Higher Yield, Lifting Spark Protocol

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The recently-introduced Enhanced Dai Savings Rate reversed some of the token’s decline in market value.

last month for a higher interest rate regime to make the stablecoin more attractive to crypto investors by tapping into protocol revenues generated by reserve assets such as U.S. Treasury bonds to pay out the reward.

The so-called Enhanced DAI Savings Rate offered initially an 8% annual reward on deposits, and was set to adjust dynamically as more and more investors made use of the promotion.Is DAI’s growth sustainable? However, questions linger about whether the growth can be sustained and new users would stick around for long.

The extra payout has drastically bitten into Maker’s profits, Kunal Goel, analyst at Messari noted in a . “Higher rates on higher deposits ballooned the protocol’s interest expense [and] has dried up profit expectations,” he wrote. The too-high rate also opened up opportunities for arbitrage, Goel added.That prompted some large investors to ditch DAI, including addresses controlled by Tron founder Justin Sun which redeemed some $200 million worth of tokens, WuBlockchainThe Maker-adjacent Spark protocol TVL also declined to $430 million from over $600 million through the week, DefiLlama data shows.

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