Sai vs Dai - My Strategy for Maximizing Interest Rates

Sai vs Dai - My Strategy for Maximizing Interest Rates

Congratulations! You have upgraded your old Sai to the new Multi-Collateral Dai (MCD) and you are ready to lend the new Dai on your favorite DeFi platform. You log into Fulcrum and see that the new Dai has an amazing....0% interest rate?? "No worries", you say to yourself. "I will just go lend on Compound or dy/dx" you think. However, once you check these platforms, you see that new Dai is not supported on either platform. A brief panic grips you as you wonder whether upgrading from Sai to Dai was a bad idea.

Don't worry though, this is not a glitch. I fully expect that more DeFi platforms will be updated to support MCD in the near future. As I stated in a previous article, it will take time for different DeFi platforms, exchanges, and wallets to completely integrate and support the new Multi-Collateral Dai. That being said, idle money that is sitting in an account and not earning interest is useless to investors. In this article, I want to share two interim strategies for earning interest on your Dai. 


I want to preface this article by pointing out that old Sai is currently earning an exceptionally high interest rate of around 6.4% on Fulcrum but that the new Dai is earning 0% on Fulcrum or is not supported at all on many other exchanges. I can already hear many of you saying, "Why should I upgrade from Sai to Dai if I am going to get a lower interest rate?" This is a valid question as every investor is always looking to earn a higher interest rate. That being said, the main reason that you should upgrade from Sai to Dai is that at some point in the future, Sai will no longer be supported. The plan is for an "Emergency Shutdown" to occur in which Sai will lose its peg to $1 USD and Sai holders will have to redeem Sai for some amount of underlying ETH collateral. In my opinion, it is better to convert from Sai to Dai now so that you don't lose that peg to $1 USD. For the purposes of this article, I am going to assume that you have already upgraded to Dai and are looking for the best way to earn interest on new MCD.


Strategy 1

The first option is to convert your Dai to another stablecoin, such as USDC, and lend that stablecoin within existing DeFi applications. As you can see from the above screengrab, USDC coin currently has an interest rate of about 5.6% on Fulcrum. I believe that this strategy is best for investors who want to earn higher returns and aren't afraid to shift between crypto assets. Let me give an example. Right now, Dai (MCD) is earning 0% on Fulcrum and 2% through Maker's Oasis portal. Converting from Dai to USDC coin brings investor's interest rate up to about 5.6%. An investor who invests $1,000 at a 5.6% annual interest rate will earn $56 in interest at the end of the year, while one who invests at 2% will only earn $20. 

Obviously, the more funds that an investor has in crypto, the larger this difference will be, but the take away point is that an investor could make over double the return by lending USDC instead of using the Dai Savings Rate program.  While the interest rate is important, it is not all-important, and the second strategy may be better for other investors. 

Strategy 2

With the advent of new Multi-Collateral Dai, it is now possible to earn interest directly through Maker's Oasis portal. The process is very simple, and all you have to do is navigate to and click "Save". Once you deposit your MCD into this portal, you will earn an interest rate of 2%. In my opinion, this strategy is best for two separate groups of people. 

1. This strategy is good for people who want to earn a "low risk" return on their Dai. According to Maker, depositing Dai into the Dai Savings Rate program carries no additional risk above holding Dai itself (Maker, 2019). This option may be best for people that don't want to have their money sitting idle earning 0% in a wallet, but are also a bit hesitant to deposit their funds on Fulcrum, Compound, dy/dx, etc.

2. The second group of people that this strategy is suited for is investors who want to remain within the Dai ecosystem. If a user were to convert from Dai to USDC to lend in accordance with Strategy 1, they would incur trading fees as well as the ETH gas fees required to move and trade their funds. Once Dai became supported on DeFi platforms and users converted back to Dai, they would be hit with a second round of exchange, trading, and gas fees that could eat into whatever extra profit that they made from lending USDC instead of Dai. 



I see advantages and disadvantages to both methods, but one key fact seems to be self-evident. Interest rates compound over time, and an investor who places their money in a low interest asset gets more and more behind as time passes. The difference in interest between lending on DSR (2%) or converting to USDC (5.6%) is minimal over the course of a few days or even weeks. However, the difference between a 2% interest rate and a 5.6% interest rate increases the longer the money is left in the accounts. 

Let's suppose that I think it will take the DeFi platforms 1 month (8%) of the year to integrate and launch lending for the new Dai. If I were to use the DSR instead of converting and lending USDC, I would only "lose" $3. However, if it takes DeFi a full year to integrate and support lending for new Dai, I would "lose" $36 by lending on DSR instead of converting and lending USDC. Note: These figures are estimates based on annual interest rates -in reality, DeFi lending accrues with every block (about 15 seconds) so these figures should be used as a close approximation. 


As an investor, I do chase higher rewards, but I also value convenience and security. Investors who currently hold the new Dai are facing a bit of a balancing act. On one hand, the Dai Savings Rate program appears to be a great way to earn a low-risk return on Dai, but the interest rate is a low 2% which is barley above some high-yield savings accounts at FDIC insured banks. In the short run, converting Dai to another stablecoin could earn a higher interest rate, but is also a hassle that involves transaction fees. 

The final decision comes down to investor preference, but there are two big questions each investor should consider. 

1. How long will it take DeFi to support new Multi-Collateral Dai?

If I expected new Dai to be supported in a few weeks or month, I would most likely keep my Dai in the DSR and accept the slightly lower rate of return. Sure, I could earn a few more bucks by converting to USDC and lending, but that would be a lot of hassle and work just to earn an extra buck or two. On the flip side, if I thought that it was going to take several months for new Dai to be fully supported, I would probably convert to and lend a different stablecoin. I could earn higher interest while I waited for DeFi to support new Dai, and then once new Dai was supported, I could simply roll my USDC back into Dai. In that case, the higher interest rate over several months would more than offset my trading and gas fees. 

2. What will the interest rate be on the new Dai lending? 

Historically, Dai has offered the highest interest rate among stablecoins. Based on my experience with DeFi, Dai seems to carry about a 1.5% interest rate premium over other stablecoins such as USDC. If Dai does not have a comparable interest rate to Sai, then this whole debate becomes a moot point. If Dai were to only carry a 4.5% interest rate, then there would be no point using DSR at 2% while waiting for Dai to be supported at 4.5%. It would simply be a better option to convert to USDC and lend at 5.6%.

While this is a possibility, I don't consider it a serious risk. My personal prediction is that interest rates on new Dai will be comparable to, or possibly higher than, old Sai. In the long run, I believe that the new Multi-Collateral Dai will be one of the highest earning stablecoins and one of the top choices for crypto lenders. That being said, we are in a bit of a transition period. While we wait for Multi-Collateral Dai to become fully supported, we can earn interest by using the Dai Savings Rate program on Oasis or converting to other stablecoins and lending those. Each investor will have to do their own research and make their own choices, but I believe that one of the most important considerations is the amount of expected downtime. How long will it be till we can start earning high interest rates our new Multi-Collateral Dai and what will we do with our funds in the meantime? 


MakerDAO. (2019, September 14). An Update on the Dai Savings Rate in Multi-Collateral Dai (MCD). Retrieved November 13, 2019, from

The Part Time Economist
The Part Time Economist

Hi everyone. I'm just a simple man trying to make my way in the universe. I am passionate about cryptocurrency and hope that I can make at least some small contribution towards promoting wider crypto adoption and understanding.

The Part Time Economist
The Part Time Economist

Hi everyone. This is just a place for me to post some of my thoughts and analysis. I hope that someone finds them useful.

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