GM 77.1 - Converting DAI to sDAI and getting real yield

Author:

Defi Beats

Abstract:

Allocate some of our stable coins into “Savings DAI” to receive interest.

Motivation/Rationale:

At the moment, we have a large amount of stables (~140,000 USD) which mostly sit in our treasury when it could be used to generate yield.

Specifics:

Allocate 35% of our stables (~50,000 USD) into DAI stable coin

Convert our DAI into Savings DAI on Summer.fi and earn 3-5% annually

DSR yield right now is 3.5-5% depending on utilization. Most revenues come from DAI being transferred to USDC and sent to custodians who deposit the funds in laddered treasury bills.

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From the Summer.fi Website:

Where does the yield come from?

The yield comes from the profits generated by MakerDAO. Since Maker wants Dai to be used extensively in DeFi it has a mechanism for incentivizing users to hold Dai. Redistributing a part of the profits of MakerDAO for the Dai Savings Rate makes Dai grow. To understand the DSR, it could be compared to base rates of different fiat currencies since the yield comes directly from the entity that works to back the coin. This, in turn, has the same effect as what happens in the world of currencies: users are incentivized to swap other coins with no base rate for Dai. This increases the demand and supply of Dai making it more used, which is the end goal of Maker: to have DAI as a leading stablecoin in DeFi.

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More context as to where the yield comes from in this breakdown (https://makerburn.com/#/rundown)

Pros :

Our stables grow in value while giving our treasury balance.

Cons:

Smart contract, governance, and custodial are the main risks, however Maker is one of the oldest protocols in defi.

From the Summer.fi website:

What are the risks?

1. Lower than expected returns: Maker makes no promise of how long the Dai Savings Rate will be at the shown level. If the Dai Savings Rate changes, users can leave their money deposited there until the rate changes again, decide to withdraw or deposit more. The changes only affect the rate of earning, the principal deposited is always available for withdrawal. Dai in the DSR has no lockup, money is not lent out or used in any fashion.
2. Systemic risk: Summer.fi works tirelessly to have the safest and most trusted platform to deploy capital and conducts regular audits of its contracts and places security as the top priority, nevertheless blockchains have unavoidable risks arising from smart contract bugs or fatal errors in any protocols being used.

Sponsors :

Westwood