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There was an error in the initial transaction submitted with this proposal. Detailed explanation here

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Author: Kene_StableLab

References

https://forum.makerdao.com/t/stability-scope-parameter-changes-2-non-scope-defined-parameter-changes-may-2023/20981

Simple Summary

MakerDAO recently increased its DAI Savings Rate (DSR) from 1% to 3.49%, at the time of writing this proposal the DSR is 5%. We recommend swapping $1M USDC to DAI and staking a total of $1M DAI into the MakerDAO DSR to generate a meaningful yield for the 1inch DAO.

Motivation

MakerDAO is a veteran DeFi protocol focused primarily on borrowing with its native Stablecoin DAI. As the 1inch DAO’s source of revenue is on the verge of being shut off if [1IP-28] Discontinue Swap Surplus Collection passes, it is essential to ensure that our assets are utilised to generate yield for the 1inch DAO. MakerDAO provides one of the safest places to generate yield by using the native DSR for DAI.

How does the DAI Savings Rate (DSR) work?

One of the monetary policy levers that MakerDAO Governance regulates is the DSR, which aids in balancing the supply and demand of DAI. This global parameter is often changed to account for fluctuations in the DAI economy’s market circumstances over short periods of time.

The Stability Fees collected from Vaults are used to fund the DSR. For instance, a DSR of 2% might be funded if the average Stability Fees paid on CDPs is 3%

These two mechanics offer tools to ensure Dai stability throughout the short and long term.

In Multi-Collateral Dai, MakerDAO Governance selects a Rates Policy Oracle with restricted access to change the DSR in real-time within a predetermined time frame stipulated by governance as part of the governance process. Other crypto-economic safeguards for the Rates Policy Oracle include a localised emergency shutdown mechanism, which enables the Maker Governance Risk Teams to quickly move to shut down the DSR Oracle until a vote by MKR holders may replace it.

The Risk Team, or a group of Risk Teams, work together to operate the Rates Policy Oracle under the direction of Maker Governance to implement the Rates Policy in accordance with the predetermined objective.

Specification

This investment proposal will be using the 1inch Aggregator to swap 1 million USDC to DAI through the PSM and then depositing the DAI into the DSR and minting sDAI directly.

In order to achieve this, this proposal has two different payloads.

This proposal suggests using SavingsDAI (sDAI) which is an ERC20-compliant token that conforms to the ERC4626 specification.

By using sDAI, the 1inch DAO can hold sDAI directly in the 1inch Treasury to represent its DSR yield.

Next Steps

If this proposal passes, the two transaction batches will be executed to facilitate this investment.