Savings Dai

Purpose and Utility

Savings Dai (SDAI) is an ERC-20 token that represents Dai tokens deposited into the Dai Savings Rate (DSR) contract. When users deposit DAI into the DSR, they receive SDAI tokens which automatically accumulate yield based on the current DSR. The protocol automatically reinvests the earned yield, increasing the redemption value of SDAI over time.

Business Model

SDAI functions as an automated yield-bearing token within the MakerDAO ecosystem. The underlying mechanism involves users depositing DAI and receiving SDAI tokens that appreciate in value over time through the DSR. The yield comes from protocol revenue and stability fees charged to vault users in the MakerDAO system.

Real-World Adoption

SDAI has gained significant adoption within the DeFi ecosystem, with over $2.5 billion worth of DAI currently deposited in the DSR system as of early 2024. The token is integrated with various DeFi protocols and can be used as collateral in certain applications.

Platform Development

SDAI is part of the larger MakerDAO ecosystem, which maintains active development and regular updates. The protocol's code is open-source and has undergone multiple security audits.

Token Distribution and Governance

SDAI tokens are minted when users deposit DAI and burned when they withdraw. There is no pre-mine or token allocation to founders - the supply is purely determined by user deposits.

Sharia Considerations

The primary concern from an Islamic finance perspective is that SDAI's core function involves earning yield on deposits, which could be considered a form of riba (interest). The yield mechanism, while automated and derived from protocol fees, still represents a guaranteed return on deposits, which is problematic from a Sharia perspective.