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8/17/2025

sDAI on Gnosis has generated over 11% APY in the last year since it launched. Current rate is around ~8%. A reaction I often get - what are the risks? Is this safe? Where does the ...

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koeppelmann.eth 🦉💳

@koeppelmann

sDAI on Gnosis has generated over 11% APY in the last year since it launched. Current rate is around ~8%. A reaction I often get - what are the risks? Is this safe? Where does the yield come from. So let me explain it in detail 👇

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koeppelmann.eth 🦉💳

@koeppelmann

Lets start with a poll - do you hold sDAI on Gnosis? If not, why not? 1) Yes 2) No - Risk too high 3) No - I have better investments 4) No - I don't know what this is/ who it works

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koeppelmann.eth 🦉💳

@koeppelmann

First, a small comment on the initial graph: It appears as if the price had some fluctuations. This is just data inaccuracy from CoinGecko. In reality, sDAI had a continuously increasing exchange rate against DAI and DAI itself didn't have any depegs from $1 in the last year.

koeppelmann.eth 🦉💳

@koeppelmann

You need to have a basic understanding how @MakerDAO (now rebranded to @SkyEcosystem) works. In Maker, people can post collateral (e.g. ETH) and generate DAI (or now USDS) against it. The usecase can simply be: I have ETH and don't want to to sell it, but still want...

koeppelmann.eth 🦉💳

@koeppelmann

...to be able to buy something in the real world. I might do that because I might speculate that ETH will appreciate or sometimes also for tax reasons. If a user does that and e.g. posts $20k worth of ETH and borrows 5k DAI against it, they will eventually need to pay more...

koeppelmann.eth 🦉💳

@koeppelmann

...than 5k back. The interest you pay currently depends on the collateral type you use. For ETH this is currently around 6-7%. You will find a full list of collateral types here: makerburn.com/#/rundown

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koeppelmann.eth 🦉💳

@koeppelmann

In total, currently $5.4b DAI are borrowed (aka in circulation) paying between 8% and 4% fees with an average of 5.1% - accumulating to an annual fee of $182m.

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koeppelmann.eth 🦉💳

@koeppelmann

Now you might rightfully ask, if the average DAI borrow is paying just 5.1% how are sDAI holders on Gnosis currently earning ~8%? First, we need to understand the "DSR" aka "DAI savings rate". Maker essentially offers DAI holders that wrap their DAI into sDAI 6% interest.

koeppelmann.eth 🦉💳

@koeppelmann

Again, you might ask - how is this possible? Well, Maker is simply benefitting from the fact that most of the DAI out there is not doing this. Out of the $5.4b DAI only 37% (or $2b) are using the DSR. In total, Maker pays them 120m - still leaving Maker with a solid $62m surplus

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koeppelmann.eth 🦉💳

@koeppelmann

Holding DAI itself has risks. While Maker/Sky is one of the most battle tested defi systems and relatively low risk - it is not completely risk free (smart contract, governance, collateral, liquidity risk). However, note that holding sDAI vs DAI does not increase these risks.

koeppelmann.eth 🦉💳

@koeppelmann

Now, lets understand how we now come from 6% DSR (sDAI on Ethereum) to 8% sDAI on Gnosis. The native currency on Gnosis (gas token) is xDAI (simply DAI bridged from Ethereum to Gnosis). In total currently ~80m. All of those 80m earn the "DSR".

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koeppelmann.eth 🦉💳

@koeppelmann

However - the interest is automatically bridged to Gnosis and given to those that choose to wrap their xDAI into sDAI. Currently around $60m are doing that and thus the interest (6% of 80m = $4.8m) is distributed to those $60m - generating ~8% interest for sDAI on Gnosis.

koeppelmann.eth 🦉💳

@koeppelmann

So in summary: Where does the yield come from? The yield comes primarily from people paying interest to borrow DAI. It is further increased by not all DAI holders claiming the DSR and it is even further increased by not all xDAI holders wrapping to sDAI.

koeppelmann.eth 🦉💳

@koeppelmann

What are the risks? The risks are the risks related to holding DAI and the risks related to bridging assets to Gnosis. These are risks that are also inherent to holding xDAI - so earning the yield via sDAI does not add to your risk. (Besides minimal wrapper smart contract risk)

koeppelmann.eth 🦉💳

@koeppelmann

Practical notes: If you want to get sDAI you should bridge some stables to Gnosis via bridge.gnosischain.com On Gnosis you can use @CoWSwap or @sparkdotfi to convert your stables into sDAI.

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koeppelmann.eth 🦉💳

@koeppelmann

I am curious! You made it to the end, here is the "exit poll": After hearing how it works in detail - do you think yield like 8% (roughly 2x the rates you would get on a regular bank account) are sustainable in defi or will the rates eventually go back to what banks offer?

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