Musings in MakerDAO: EDSR and the End Game

By Michael @ CryptoEQ | CryptoEQ | 12 Aug 2023

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From the enhanced DAI savings rate (eDSR) to a shift towards real-world assets (RWA) to remodeling its entire internal governance via the End Game model, Maker's initiatives are not only reshaping its own trajectory but also influencing the broader sector. Let's dive in!

The Enhanced DAI Savings Rate (eDSR)

In June, Maker introduced the eDSR, initially setting the yield at 3.49%. A subsequent proposal in late July transformed the interest rate into a dynamic model, with the potential to see the yield reach 8%. The eDSR aimed to catalyze the adoption of DAI by offering deposit rewards that surpass traditional finance benchmarks. DAI has now positioned itself as one of the most attractive yields in DeFi, offering the most competitive yield among its stablecoin peers. This yield outperforms several money market returns as well as returns from decentralized exchange liquidity providers. This ascent in the DSR has catalyzed a noteworthy surge in DAI inflows, with the overall volume escalating from an estimated $340 million to a robust $1.18 billion. Although the elevated interest rates may be temporary, they present a valuable opportunity for projects to capitalize on, fostering lasting treasury growth. By offering an attractive savings rate, Maker could improve the liquidity of DeFi, setting a precedent for other protocols.

Maker's End Game

The cryptocurrency space, emblematic of innovation and rapid change, continues to metamorphose, and MakerDAO is no exception. Recognized as one of the pioneering forces behind decentralized finance (DeFi), the entity is set to undergo a significant transformation that is both compelling and indicative of larger trends within the sector.

Maker's strategy underscores a commitment to diminish the protocol's reliance on centralized collateral. Notably, this approach signals an important shift for the DAI stablecoin, which will strategically reduce its pegging to the US dollar. This evolution is designed to mitigate some inherent risks tied to centralization. For instance, the current setup, which largely depends on centralized stablecoin collaterals, could be susceptible to external economic and regulatory pressures. By moving away from this model, Maker demonstrates foresight in addressing the foundational challenges of DeFi.

Phase 1: The Rebranding Initiative

At the forefront of this transformation is the rebranding of Maker. This move is not just a cosmetic change, but rather a foundational one. While $MKR and $DAI tokens will continue to play a role, the protocol's future will be anchored around their wrapped versions. This indicates an overarching strategy, designed to maintain continuity while setting the stage for the protocol's next growth phase.

Phase 2: Embracing SubDAOs

The introduction of SubDAOs marks the next significant step. These entities will play a pivotal role in decision-making within the protocol, each being associated with a distinct token. Specifically, FacilitatorDAOs will oversee governance operations, while AllocatorDAOs will zero in on service expansion and broadening the user base.

Phase 3: Navigating Governance with AI

The complexity of DAO governance often poses a challenge even for seasoned users. To make this easier, Maker is integrating AI tools. These tools will guide users through governance data, ensuring clarity and better decision-making by making terminology and processes more accessible.

Phase 4: Amplifying Governance Engagement

The introduction of the Sagittarius Lockstake Engine (SLE) showcases Maker's commitment to bolstering governance participation. By incentivizing NewGovToken holders to delegate their tokens, the initiative stands to promote a more active and engaged community.

Phase 5: Fortifying Against Threats with Custom Infrastructure

The final phase involves Maker launching its blockchain. This isn't merely a technological upgrade but a strategic safeguard. Should a bad actor acquire enough governance tokens to attempt a forced shutdown, Maker's standalone operation would offer the flexibility to handle such disputes, even resorting to hard forks if needed.

In conclusion, while transitioning from high-revenue collateral might present initial obstacles, Maker's vision is unambiguous: achieving enduring sustainability. For cryptocurrency investors and users, understanding the nuances of such strategic shifts is essential, as it offers a window into the evolving landscape of decentralized finance and the future trajectory of its major players.

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.

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