World Prices
Back to Main Menu
Back to Main Menu
Back to Main Menu

Dai Savings Rate Explained

dai savings rate
Current Rate 0.10%
Previous Rate 0.00%
Date Last Changed 25th February 2021

2020/21 Instability

On Thursday 12th March 2020 an unprecedented crash in the price of ETH created issues for the Dai system. These issues resulted in a significant break from Dai’s dollar peg, seeing the cryptocurrency trade as high as $1.08. In an attempt to restore the dollar peg, governing members decided to reduce the DSR to zero percent in order to motivate users to sell their Dai on exchanges (bringing the price of Dai closer to $1.00).

In April 2021 the system entered into a surplus above the required DAI buffer.

Dai Savings Rate Explained
What is the Dai Savings Rate?

The Dai Savings Rate (DSR) is an interest rate that is applied to deposits of the cryptocurrency, Dai (DAI). To understand how the DSR works, as well as the risks and benefits involved, it is first important to understand Dai itself.

Dai Savings Rate Explained
Dai, the stable cryptocurrency

Stable cryptocurrencies, referred to as “stablecoins”, are currencies whose value is pegged to a traditional currency like US Dollars. The world’s largest stablecoin, Tether (USDT), was founded in 2015 and has seen incredible growth, issuing over $4.5 billion coins in its short tenure.

Most of Tether’s usage comes from cryptocurrency exchanges, where users can trade volatile coins like Ethereum and Bitcoin for stable USDT without having to touch the traditional banking system.

Tether found its stability by backing each USDT token issued with US dollar bank deposits. This stability mechanism, which has so far been successful at maintaining the coin’s one dollar peg, is not without controversy. There are a number of issues that Tether and other stablecoins like it face:

  • Transparency – Tether’s bank deposits have never been fully audited. In April 2019, a lawyer representing Tether admitted that only 74% of its circulating coins were backed by cash and cash equivalents.
  • Centralization – the issuance of new coins is conducted behind closed doors and decisions are made without explanation.
  • Censorship – the centralized nature of Tether opens up the possibility of transaction censorship either through government pressure or internal decision making.

Other cryptocurrencies like Coinbase’s USDC, Gemini’s GUSD and crypto-hopeful, Libra, take a far more transparent approach, but they have not solved many of the issues that come with centralization.

How does Dai remain stable?

Dai on the other hand, has taken a radically different approach to stability.

Built on the Ethereum blockchain and introduced in January 2018, Dai was unlike any stablecoin before it. Instead of finding stability in bank deposits, Dai would use a governance mechanism to maintain its peg to the US Dollar. This mechanism would allow participants to vote on increasing or decreasing the supply of Dai; increasing supply if the price drifted too far upwards or decreasing it if the price slipped down from the peg. Simple supply-side economics predicts that an increase in an asset’s supply would reduce its price, while a decrease in supply would increase it.

This mechanism has proven extremely versatile, allowing Dai to maintain its peg despite the market crash of January 2018 and the volatility that followed.

DAI Price (USD) Over Time

3m 1y all
DAI Price (USD) watermark


MakerDAO and the MKR token

Before we can fully understand how the Dai Savings Rate works, we have another construct of Dai to familiarize ourselves with.

MakerDAO is the name given to the governance mechanism that determines outcomes like the one mentioned above (increasing or reducing the supply of Dai to maintain the one dollar peg). The DAO (decentralized autonomous organization) is underpinned by a second token in the system, MKR, whose value is not stable but is used to help maintain the stability of DAI.

There are many layers of complexity to Maker (MKR) that this article won’t touch upon, however this DAO governance mechanism is the last piece in understanding how the Dai Savings Rate came to be.

In the example above, we described the increase or decrease in Dai supply as a way to maintain Dai’s one dollar peg. However, the process is not as straightforward as adding or removing Dai from circulation. Instead, the system uses a number of risk parameters to maintain the peg – one of which, the Stability Fee, is used to organically manage the supply of Dai.

Stability Fee

Dai is issued, not by a central party, but by anyone who wishes to borrow Dai from the system. To borrow (issue) Dai, a user must deposit collateral (Ether) in the system, allowing them to take out a loan of Dai against this collateral. The interest rate that is applied to this newly created Dai is called the Stability Fee.

An increase in the Stability Fee would discourage users from borrowing Dai as it would be more expensive to do so. Those who had already borrowed from the system would also be more likely to pay back their loan, depositing the borrowed Dai into the contract and removing it from circulation. A decrease in the Stability Fee would have the opposite effect, encouraging users to deposit ETH and borrow (issue) Dai at a lower cost.

One of the primary use-cases of borrowing Dai is to invest the borrowed Dai in Ether, leveraging their existing position in the expectation that the price of ETH will increase greater than the cost of borrowing (Stability Fee).

It is hopefully now clear how the Stability Fee, which is voted on by MakerDAO, can be used to organically manipulate Dai supply and maintain the DAI-USD peg.

Dai Savings Rate

In November 2019 the MakerDAO system received a major upgrade. The upgrade introduced a number of new concepts including the Dai Savings Rate, an interest rate that is applied to all Dai deposited in a particular smart contract. This interest rate is paid from the funds generated by the Stability Fee and its rate is also decided by a MakerDAO vote.

We have just seen how the Stability Fee can be used to manipulate the supply of Dai and maintain the DAI-USD peg. In a similar vein, the Dai Savings Rate can be used to manipulate the demand of Dai and maintain the DAI-USD peg.

The Dai Savings Rate, then, provides MakerDAO governance with another string to their bow. Rather than maintaining the peg through supply-side economics alone, it is now possible to use the DSR to influence the demand for Dai. An increase in the Dai Savings Rate will increase the demand for buying Dai at an exchange, depositing the purchased Dai in the DSR contract and earning interest. A decrease in the Dai Savings Rate has the opposite effect, encouraging users to sell Dai to invest elsewhere.

This has hopefully explained why the Dai Savings Rate exists and how it plays an important role in maintaining and fine-tuning the DAI-USD peg.

Dai Savings Rate Explained
How is the Dai Savings Rate decided?

The MakerDAO governance system and selection of the Dai Savings Rate is a multi-step process that begins with the Maker Foundation issuing a poll to MKR token holders. The poll is used to gather opinions on a number of risk parameters including the DSR. Once a poll has closed (after 2-3 days), it can be used to influence a subsequent “Executive Vote” that, once passed by MKR token holders, implements the changes voted on.

Ultimately the DSR is determined by the system’s token holders and can be set within a range outlined by the Maker Foundation. This range is typically between 0.25% and 8.00% but is capable of going higher should the community deem it necessary.

As we’ve learned before, the Dai Savings Rate’s primary goal is to maintain the DAI-USD peg. The DSR must be used in tandem with the Stability Fee to balance the supply and demand of DAI and – because the Stability Fee pays for the DSR – the DSR has an upper bound equal to the Stability Fee.

One of the main motivations for users borrowing Dai and paying the Stability Fee is to leverage their ETH position; locking ETH as collateral, borrowing Dai against it and then buying more ETH (and possibly even repeating the process). This means that the Stability Fee (and therefore the DSR) can safely be increased as confidence in the future price appreciation of ETH increases. This also works in the opposite direction; as ETH confidence falls, users are less likely to leverage their position and the Stability Fee must fall (along with the DSR) to maintain the peg.

It should also be noted that MKR token holders financially benefit from the growth of the network. A high DSR would no doubt attract greater adoption of Dai – therefore a maximally high DSR (where the peg is still maintained) is also desirable.

Dai Savings Rate Explained
What are the risks of the Dai Savings Rate?

Unlike traditional investments, the Dai Savings Rate does not reflect its risk. A high DSR is a reflection of the system’s desire to increase demand for Dai in order to stabalize the currency’s US Dollar peg. While an interest rate as high as 8.75% may seem risky, it is not the interest rate itself that indicate risk. Instead, the risk profile of the DSR takes into account the following factors:

  • Wallet Management Risk – losing a wallet’s private key (password) or badly formatting a transaction are the most common mistakes made when handling cryptocurrency but are also the easiest to mitigate. Choosing an Ethereum wallet and securing your funds is an essential first step to successfully earning the Dai Savings Rate. This risk – and the mitigation of it – is elaborated on under the security heading in the section below.
  • Smart Contract Risk – while the Ethereum platform is extremely secure, the applications built atop its blockchain might not be. Despite MakerDAO having undergone a number of smart contract audits, exploits and loopholes can potentially break the system with little recourse. The Maker Foundation have somewhat mitigated this with their “Emergency Shutdown” feature in the event of catastrophe.
  • Governance Risk – the governance mechanism behind MakerDAO has previously been flagged as a possible security hole. While that particular hole was sealed, the plutocracy that governs MakerDAO (more tokens equals more power) could lead to a possible hijacking of the system. Given the current lack of liquidity and the centralization of coins among a number of heavily-invested entities, it is unlikely that such an attack could take place or be effective.
  • Regulatory Risk – the risk of regulators upending the system is vague and hard to quantify. Dai is a representation of US Dollars on the blockchain but without any oversight from US regulators. This is arguably one of Dai’s strongest features, providing fair access for all to the world’s most widely-accepted currency, however it is likely to frustrate the powers that be in US government.
  • Platform Risk – Ethereum, at this point, has proven itself to be an unbreakable world computer. That said, there are a number of software upgrades on the horizon that could introduce new risks not yet accounted for.

There are also, of course, black swan events or “unknown unknowns” that come part and parcel with new technologies. While the DSR interest rate does not reflect these known and unknown risks, it does provide one of the highest yield and safest returns on investment in blockchain-based “Decentralized Finance”.

Dai Savings Rate Explained
How to earn the Dai Savings Rate

When it comes to earning passive income in DeFi, the Dai Savings Rate (DSR) introduces a new paradigm for decentralized, non-custodial value accumulation. This means the DSR is:

  • Community governed – Interest rates are determined by MakerDAO participants
  • Autonomous – Interest is funded and paid using smart contacts with no reliance on a trusted third party
  • Secure – Escrowed funds are stored in audited smart contracts, rather than being custodied by a third party which introduces the potential for theft/corruption.

Argent is an Ethereum smart contract wallet that has a number of advantages over other types of Ethereum wallet, including gas-free transactions (Argent pay the fees on your behalf) and programmability (daily limits and authorizations are enforced by the Ethereum blockchain).

Argent have combined these features to create one of the easiest methods for saving in the DSR, abstracting away the complexities of Ethereum through a well-designed mobile app.

Using this link, users are able to download the Argent wallet (available on Android and iOS) and immediately skip the waiting list. From there, Dai deposits are straightforward.

Full disclosure, is not compensated when you visit Argent from this page.

The first step is to purchase Dai through the Argent app or via an exchange such as

With Dai purchased, the app can be used to deposit directly into the Dai Savings Rate.

1. Select “Finances” from the dashboard and select “Grow your holdings”.

start saving in the Dai Savings Rate

2. Select “Dai Savings” from the options. Those interested in Compound can learn more here.

select Dai Savings from the options

3. Select “Top Up” and choose the amount of Dai you would like to deposit.

deposit in the DSR

Once you have selected the amount of Dai to deposit, select “Save DAI” and let the smart contracts go to work. You will then be able to follow the interest earned (in real-time) from the app’s dashboard.


  • Ability to earn the Dai Savings Rate without any prior Ethereum experience.
  • Deposits are secured by Ethereum smart contracts.
  • No management or admin fees


  • While the wallet has been audited, there are risks to consider when using the DSR (see the risks section on this page).
Deposit with Argent

Earning the Dai Savings Rate in 3 steps

Argent is one way to earn the Dai Savings Rate, however for those looking to invest directly in the DSR without a third party, the following steps can be used.

This method is ideal for users who wish to familiarize themselves with the slightly more complex aspects of Ethereum and the Dai Savings Rate. It will also serve as a good basis for those looking to invest in other DeFi applications in the future.

1. Buy Dai

If you are planning to make a deposit of a significant size, please skip ahead to “Securing your investment” and then return to this section. For smaller or experimental deposits, continue reading.

As a new user to Ethereum, the first step is to buy Ether from a cryptocurrency exchange. The most user-friendly route is through Coinbase, a regulated US-based exchange with banking partners across the world and available in hundreds of countries.

Ether can then be bought via bank transfer or credit/debit card, which can then be traded instantly for Dai either on Coinbase again or via another exchange.

convert ETH to DAI on Coinbase

It is possible to buy DAI with currencies other than ETH, however the ETH/DAI market pair is one of the most liquid, providing fast access and at a fair market rate. Coinbase also offers a USDC/DAI market pair which may prove more effective for buyers in the United States.

2. Install a web3 wallet and transfer funds

With Dai now purchased, the next step is to transfer your newly purchased stablecoins to a web3 or “browser” wallet.

A web3 wallet is installed as a Chrome or Firefox extension and effectively adds a layer on top of your browser that enables Ethereum functionality on compatible websites. This means that buttons and actions on a website can prompt Ethereum transactions, making it simple to engage with smart contracts via a familiar web interface.

There are a few browser wallets available, however the market leader, MetaMask, is the perfect tool for the job and a good one to get started with.

metamask wallet address

Before transferring your Dai and ETH to your MetaMask wallet address, be sure to export and secure your MetaMask private key. You can use this private key to regain access to your funds on another computer or device.

Now that MetaMask has been installed and the key has been backed up, you’ll need to send your DAI (along with some ETH) to its address. You can get your wallet’s address by clicking the address as shown in the image above.

Ethereum Gas Fees

When making transactions on the Ethereum blockchain, some ETH is required to pay for transaction fees. Transaction fees range from 1 cent through to more than one dollar (denominated in ETH) depending on the complexity of the transaction. For DSR deposits, include 2 dollars of ETH with the wallet to account for the Dai Savings Rate deposit as well as future transactions.

3. Deposit in the Dai Savings Rate contract

Congratulations, your MetaMask wallet now has some DAI and ETH and is ready to interact with the expansive world of web3!

Visit, the interface for all of Maker’s financial tools including borrowing and trading, and select “Save Dai”. On the next page, you will need to connect your MetaMask wallet. Select “MetaMask”, grant the necessary permissions and then select “Get Started”.

You’re now moments away from investing in the Dai Savings Rate but there are just a couple of steps remaining.

The first is to setup a proxy and an allowance, these are smart contract functions (available here for those so inclined: see DSProxy()) that improve the efficiency of transactions and provide your proxy with the permissions to move your Dai. This sounds a little complex but the smart contract does all the work for you – you simply need to initiate the transactions by clicking the prompts on the website and in MetaMask. These transactions will take roughly 15 seconds for each to complete and will not need to be done again.

With these transactions completed, your account is now ready to deposit in the Dai Savings Rate and begin earning interest – choose the amount you wish to deposit and click “Deposit”. This will trigger another prompt in MetaMask for your approval and once approved, will begin your deposit.

Dai Savings Rate deposit field

Once funds are successfully deposited, it is possible to view your earnings in real-time on the left hand side. Withdrawals can be made from the Dai Savings Rate contract at any time and without penalties.

Securing your investment

The DSR is considered to be the safest interest rate as returns are baked directly into a Maker smart contract, rather than adding another layer of trust/complexity by integrating interest rates from other “decentralized finance” (DeFi) protocols. Seeing as Maker is the issuer of Dai, their protocol goes to extra lengths to ensure the DSR is sustainable by funding it through Stability Fees – or debt accrued by lenders who borrow Dai through Oasis Borrow.

However, one of the biggest risk factors comes from wallet management. A misplaced private key or deleted hard drive can wipe a user’s balance without any possible recourse. Fortunately, it is possible to mitigate these risks without too much difficulty.

If you are a first time user to either Ethereum or the Dai Savings Rate, it’s recommended that you initially start by making a small deposit through MetaMask as outlined in the steps above. Once you are comfortable with the process, it’s recommended that you move to a “hardware wallet” approach.

The reason for this is that the MetaMask wallet, that we used in our example, lives in a browser which could be accessible by others – either intentionally or unintentionally. For full security and peace of mind, the best option is to use a hardware wallet, also referred to as a “cold wallet”. These wallets can be thought of as a highly-secure USB drive that is accessed by using a PIN. The wallets remain offline at all times and cannot be hacked remotely. One such wallet, the Ledger Nano S or Ledger Nano X, can be used as a web3 wallet to interact with the Oasis app in a similar way to MetaMask.

Should you wish to use a hardware wallet like Ledger the same steps above can be followed, the only difference is that transaction prompts will be sent to your hardware device instead of your browser. You will also need to select Ledger as the wallet connection when visiting With those steps completed, your Ledger wallet will then earn Dai while it sits securely offline.

Dai Savings Rate Explained
Dai Savings Rate Derivatives

For slightly more sophisticated users, offers an intuitive dashboard to quickly “wrap” your Dai as a transferable, DSR-earning asset called CHAI. Chai shares all the same properties as Dai while constantly accruing interest from the underlying DSR contract.

chai wrapper

To wrap Chai, simply input the amount of Dai wishing to be wrapped (or converted) and approve the transaction on the web3 wallet holding the tokens. Dai is automatically wrapped using a smart contract, replacing your Dai balance with an equivalent value of Chai.

Please note that Chai adds another smart contract on top of the Dai Savings Rate and therefore introduces another set of risk factors. The Chai smart contract has not yet been audited.


Dai Savings Rate Explained
Dai Savings Rate History

Date Activated Rate
February 25th 2021 0.10%
March 17th 2020 0.00%
March 15th 2020 4.00%
February 20th 2020 8.00%
February 9th 2020 7.50%
February 4th 2020 8.75%
January 26th 2020 7.75%
January 8th 2020 6.00%
December 6th 2019 4.00%
November 18th 2019 2.00%

Dai Savings Rate FAQ

What penalties or limits are placed on deposits?

The DSR does not have any limits or penalties. Investors are free to deposit and withdraw Dai from the DSR at any time.

What is the minimum deposit?

There is no minimum deposit. Anything “greater than 0” can be deposited in the Dai Savings Rate contract.

Are Dai Savings Rate deposits protected?

DSR’s only protection comes from the smart contract code that underlies the system. Smart contracts have been exploited in the past and losses are irrecoverable. The Dai Savings Rate contract is not insured.

How is the Dai Savings Rate funded?

The Dai Savings Rate pays its depositors through interest earned on debt that is generated elsewhere in the system.

This debt is created in the from of Dai, which is issued to those who wish to borrow Dai against their collateral (typically, ETH).

How high or low can the DSR go?

The DSR launched at a low of 2.00% and has seen a high of 8.75%. The DSR is somewhat bound by other factors in the MakerDAO system as outlined in this article.

What is SAI?

DAI launched in January 2018 and it was not until November 2019 that the network went through its first major upgrade and introduced the Dai Savings Rate. It was at this time that the existing DAI was renamed to SAI (single-collateral DAI) and the new and improved version took on the DAI name.

Subscribe for weekly Ethereum insight.