What Is the DAI Savings Rate (DSR)? Explained

The DAI Savings Rate (DSR) is a yield that holders of DAI (or its successor, USDS) can earn by locking the stablecoin into a dedicated savings module, funded by the stability fees the protocol collects from borrowers who mint DAI against collateral.

Unlike variable lending rates on money markets, which fluctuate constantly with pool utilization, the DSR is a rate directly set by the protocol's governance — currently Sky, formerly MakerDAO. It functions less like a market-clearing interest rate and more like a policy rate a central bank might set, adjusted deliberately rather than algorithmically in real time.

How the DSR is funded

DAI is minted when users lock collateral into a vault and borrow against it, paying an ongoing stability fee — effectively an interest rate on the borrowed DAI — for as long as the loan is open. That stability fee revenue flows into the protocol, and a portion of it is used to pay the DSR to anyone who has locked DAI into the savings module.

This creates a direct link between borrowers and savers within the same ecosystem: borrowers who mint DAI against collateral are effectively the ones funding the yield paid to DAI holders who choose to save rather than spend or deploy it elsewhere.

Why the rate is a policy tool, not a market rate

Governance sets the DSR deliberately, using it as a lever to influence DAI's supply and demand balance:

• Raising the DSR makes holding DAI more attractive relative to other stablecoins or yield opportunities, which can pull DAI out of circulation and into the savings module, reducing available supply and supporting the peg if DAI is trading below its target.
• Lowering the DSR makes holding DAI less attractive, encouraging users to deploy it elsewhere, which can help absorb excess supply if DAI is trading above its target.

This mirrors, in a decentralized context, how a central bank adjusts a policy interest rate to influence currency demand — except the DSR is set by on-chain governance votes rather than a monetary policy committee, and DAI's value proposition rests on crypto collateral rather than sovereign backing.

DSR vs. a typical money market supply rate

	DAI Savings Rate	Money market supply APY (e.g., Aave)
Rate-setting mechanism	Governance-set policy rate	Algorithmic, driven by utilization
Funding source	Stability fees from DAI borrowers	Interest paid by market's own borrowers
Update frequency	Periodic governance decisions	Continuous, block by block
Primary purpose	Peg management and monetary policy	Market-clearing between suppliers and borrowers

The risks to understand

The DSR is only as reliable as the protocol's overall solvency and governance. Key considerations:

• Collateral risk. DAI's stability ultimately depends on the quality and volatility of the collateral backing it, including any real-world assets involved — see our guide on stablecoins for how different stablecoin designs handle this.
• Rate changes are discretionary. Governance can lower the DSR at any time in response to market conditions, so it isn't a fixed, guaranteed yield.
• Smart contract risk. Locking DAI into the savings module still means interacting with a smart contract, carrying the usual risk that any DeFi deposit carries.

Why this matters even if you don't hold DAI

The DSR is one of the most closely watched rates in DeFi because it functions as a kind of on-chain "risk-free rate" benchmark — other stablecoin yields and lending rates are often compared against it to judge whether they're offering a genuine premium for additional risk, or just matching what a governance-set policy rate already offers with less complexity. You can track current stablecoin yields and rates across protocols on our yield rankings page.

Bottom line

The DAI Savings Rate lets DAI or USDS holders earn a governance-set yield funded by borrower stability fees, functioning as a monetary policy tool for managing DAI's peg as much as a savings product. It's a useful benchmark rate across DeFi, but it's a discretionary rate set by governance, not a fixed or guaranteed return.