# MIP118: Introduce a 7-Day Notice Option to the Dai Savings Rate (DSR) to Support ALM [RFC Only] I am posting Notice DAI in MIP format to receive more formal feedback and to determine which CUs/SubDaos/Etc would need to further provide inputs for this enhancement. I am extending the RFC period to give more time for feedback as the current state is in the process of migration (or not). This allows for resources to remain focused on the current efforts, while still allowing feedback to be gathered on this Notice DAI. Any potential issues can be addressed during the extended RFC period. For example, due to short-term rates forecasted to rapidly change throughout this year, the notice period and rate will need to be updated prior to submission (if submitted). ## Preamble ``` MIP#: 118 Title: Introduce a 7-Day Notice Option to the Dai Savings Rate to Support ALM Author(s): TRUEMAKER Contributors: Tags: Type: MIP Type Status: Obsolete Date Proposed: 2023-02-20 Date Ratified: Dependencies: Replaces: Forum URL: https://forum.makerdao.com/t/mip118-introduce-a-7-day-notice-option-to-the-dai-savings-rate-dsr-to-support-alm-rfc-only/19873/1 Ratification Poll URL: Extra: This MIP has been made obsolete by the passage of [MIP102c2-SP1](https://mips.makerdao.com/mips/details/MIP102c2SP1) ``` ## References * [Discussion on Enabling the DSR ](https://forum.makerdao.com/t/discussion-on-enabling-the-dsr/18759) * [Alternative Options to the Current DAI Savings Rate (DSR) ](https://forum.makerdao.com/t/informal-poll-alternative-options-to-the-current-dai-savings-rate-dsr/19810) * [Modeling DAI maturity ](https://forum.makerdao.com/t/modeling-dai-maturity/15961) * [MIP103: The Stability and Liquidity Scope Framework ](https://forum.makerdao.com/t/mip103-the-stability-and-liquidity-scope-framework/19675) * [MIP65: Monetalis Clydesdale: Liquid Bond Strategy & Execution](https://forum.makerdao.com/t/mip65-monetalis-clydesdale-liquid-bond-strategy-execution/13148) ## Sentence Summary This MIP proposes adding a 7-day notice option to the DSR with a rate of 1.25%. ## Paragraph Summary This Maker Improvement Proposal (MIP) proposes adding an alternative option to the Dai Savings Rate (DSR) offering. Currently, the only option is instant access with funds unlocked immediately. This proposal would create a 7-day unlocking option (7-day notice option) at a rate of 1.25%. ## Component Summary **MIP118c1: Dai Savings Rate (DSR)** A protocol-wide savings rate that incentivizes users to lock DAI and earn interest. It's a cost to the protocol. The rate is determined by the community and can vary based on revenue generated by the protocol and funding need. **MIP118c2: 7-day notice DSR** Introduce an optional 7-day notice period at a higher rate of 1.25% ## Motivation * The motivation behind this proposal is to fill an identified gap in the current Dai Savings Rate (DSR) offering that can better serve Maker's ALM strategy today and in the endgame state. As a balance sheet expert and experienced ALM member at multiple global banks, I am confident this proposal would enhance the offering and provide DAI holders an incentive to grow their holdings. * This proposal would introduce an additional option to the DSR offering with a 7-day unlocking period at a rate of 1.25%, which is a 25% better rate than the current instant access option (i.e. 1.00%), and could potentially attract more stable DAI funding at a reasonable rate. ![chart1](https://github.com/makerdao/mips/blob/master/MIP118/chart1.png) * The competition for funding, i.e., stable deposits, is intensifying as many banks and stablecoin issuers report lower year-over-year deposits and market caps, respectively, due to a shrinking money supply and alternative higher-yielding options for cash (see chart below). To compete in this rate environment, it is necessary to have a diverse range of options with various interest rates. The addition of a DSR option will help us compete and increase our stablecoin market share. There is still a large gap between market rates and DSR rates, but with the introduction of a notice DAI option, the protocol can now test demand by altering the DSR rate between instant and notice and identify the optimal cost of funding to fund its ongoing lending and investment program. ![chart2](https://github.com/makerdao/mips/blob/master/MIP118/chart2.png) ![chart1](https://github.com/makerdao/mips/blob/master/MIP118/chart3.png) * The 7-day notice period would increase DAI's competitiveness, reduce liquidity risk, and increase liability duration. This would allow the protocol to have higher-yielding assets (e.g., dated treasuries), increase stability through locked funds, and test the demand/supply dynamics of different rate offerings. * Additionally, the 7-day notice period is attractive to Maker as it allows the protocol to unwind RWA investments such as MIP65, MMFs, and ETFs, while offering incentives to DAI holders. This proposal aims to reduce the gap between the asset and liability sides of Maker's framework, strengthen liabilities management, and create a buffer in uncertain times. ## Specification / Proposal Details ### MIP118c2: 7-day notice DSR * This proposal would create an additional DSR option of 7-day unlocking option (7-day notice option) at a rate of 1.25%. This would provide an alternative option to the DSR (Dai Savings Rate) offering. * Stability - The 7-day notice period would allow users to lock DAI into the DSR and receive a variable rate of 1.25%. DAI would be locked in the DSR and would be available for withdrawal after the 7-day lock-in period is triggered by the user. The 7-day notice period would enable users to access their locked funds and also provides an incentive for DAI holders to keep their DAI in the DSR for longer periods of time, thus providing stability to the protocol. * Security - The 7-day notice period would be implemented using the DSR smart contract that would ensure that funds are securely stored and that users can access their funds after the 7-day lock-in period.