Maker moves to meet demand for DAI

SparkLend has been approved for a doubling of its debt ceiling to 2.5 billion DAI

article-image

Phoenix Labs CEO and MakerDAO former protocol engineer Sam MacPherson | DAS 2022 New York by Blockworks

share

MakerDAO, creator of the DAI stablecoin, has a good problem: Demand for its product is high.

SparkLend, a borrowing and lending platform organized as a sub-DAO within Maker, has issued so much DAI in recent weeks that it needs authorization to lend more.

In a governance vote approved Thursday at 12:00 pm ET, Maker voted unanimously to double the D3M maximum debt ceiling to 2.5 billion DAI.

“D3M” stands for Decentralized Debt Markets Module, a mechanism designed to optimize the DAI liquidity across different DeFi platforms. The module automatically adjusts the DAI borrowing rates on external platforms (like Aave) to be in line with the Dai Stability Fee within the MakerDAO system.

Read more: MakerDAO balance sheet now majority crypto-backed loans

Motivating the change is the rapidly accelerating demand for loans at SparkLend in the past week, which left available DAI falling to 250 million. Maker’s risk experts lobbied in favor of the increase, arguing there’s no need to keep it so constrained.

“With recent bull market conditions, it is becoming increasingly difficult to keep up with borrowing demand,” Monet-Supply, analyst with Block Analitica wrote on the Maker forum, noting that the protocol blew through its last debt ceiling increase and is growing at an average rate of around 20 million DAI per day.

“This poses a risk of unintentionally hitting the D3M maximum debt ceiling and artificially limiting Spark’s growth,” he wrote. 

MakerDAO recently more than doubled stability fees across the board on March 10 following an executive vote. The Dai Savings Rate (DSR) jumped from 5% to 15%.

Stablecoin yield opportunities have been on the rise, leading traders to swap DAI borrowed at low rates for higher yielding USDC or other stablecoins used in DeFi.

For instance, in addition to promising high yields, a new entrant to the stablecoin market (Ethena’s USDe) is incentivized by a points-like system called “shards.”

Read more: Stablecoins need to focus on liquidity, not decentralization — Ethena Labs founder

That dynamic puts downward pressure on DAI’s dollar peg and pushed Maker’s PSM module, which allows swaps between DAI and USDC, down to record lows.

Read Blockworks Research: MakerDAO: Organic demand doesn’t grow on trees

Ethena co-founder, known as Leptokurtic, argued on an X space this week that his protocol’s contribution to Maker’s rate increase was overstated, noting that Ethena had captured less than 1% of the total value locked (TVL) in DeFi to date.

“I actually think the marginal impact that Ethena has had on these changes is probably less than people are giving credit for over the last few weeks,” Leptokurtic said. “These rate changes were going to happen with or without Ethena being there — it’s just now people make that connection a bit easier between rates in [centralized finance] and DeFi.”

Spark developer Sam MacPherson, CEO at Phoenix Labs, said during the same discussion that current rate levels are “almost certainly not sustainable” in the long run.

Read more: Spark Protocol is re-thinking stablecoin stability mechanisms

“Ethena is performing a great function here in bridging this disjointed rates behavior,” MacPherson said. “Maker is at the mercy of the market just as much as everybody else, it’s just that there’s no smart contract doing it, there’s more of a slower human process that people attribute agency to the rate setting within Maker — but that’s really not the case.”

For stablecoin holders right now, times are good, with many options to receive relatively safe double-digit yields.

The question is, how long can it last?

“You can’t have 30,40, 50% rates on USD that is sustainable,” MacPherson said. “Eventually [traditional finance] is going to come in on size,” and push rates back down.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

recent research

LTIPPanalysis.png

Research

This report is a retroactive analysis of Arbitrum's Long Term Incentives Pilot Program (LTIPP). We collect relevant data at a protocol level and review bi-weekly updates to analyze recipients, their strategies, and the impact of the incentives on high level growth metrics. In particular, we want to highlight outperformers and underperformers, and glean any best practices or lessons learned for protocols distributing ARB incentives in the future. The overarching goal is to synthesize lessons learned that the DAO can reference as it begins thinking about future incentives programs–namely, the working group for incentives that is being actively discussed–especially as Timeboost introduces new conditions for trading and economic activity.

article-image

Sponsored

AI project Zerebro intersects the spheres of artificial intelligence, finance, art, music, and culture

article-image

Allmight is focused on furthering the United States’ leadership in crypto

article-image

The conditions Charles Schwab is waiting for before jumping headfirst into crypto could take shape soon

article-image

The FCA’s director of payments and digital assets shared some takeaways from chats with crypto companies and law firms

article-image

Let’s take a look at how US equities typically perform this time of year and what we might see in the coming days

article-image

Lumina introduces transparency and permissionless integration via an OP stack-based optimium, challenging traditional oracle designs