We will attempt to conduct an initial analysis of the 600 million Token issuance that SKY has planned to carry out annually to remunerate USDS (DAI) depositors.

The Token Reward rate will be 600 million NewGovToken per year distributed to participating NewStable holders

This involves using an initial 2.67% increase in the project's total token supply, which will be primarily employed as a marketing budget with the aim of generating demand for USDs deposited in the DSR module.

Assuming that the market capitalization of the SKY token remains at the starting price, this amounts to approximately 40 million dollars.

Estimation of Deposit Growth Due to the Extra Rate

The remuneration will initially be given to all USDs depositors in the DSR. Those 40 million with the 2.5 Billion in deposits in the DSR represent an extra rate of 1.6%.

This would certainly position the yield above other lending protocols such as Compound, which offers 5% on USDT, although it doesn't reach the yield currently offered by AAVE, which is around 20%, these being the main comparable alternatives in terms of risk.

How does the token capture value as a consequence of this token issuance? Well, this will depend on the interest margin with respect to the 6% currently delivered by the DSR compared to the interest that the protocol obtains from its loans. Currently, the average return on funds is 4.7%, so at this time it could not be compensated given the DSR unless the offered yield was lowered.

Assuming that this margin could be 1% in the future, then capturing 4.000 million USDS would be sufficient for the initiative to be profitable.

Investor Behavior in the DSR

We cannot anticipate the behavior of the DSR depositor when receiving their SKY tokens, but if it is used by other protocols that are purely seeking profitability in dollars, it is expected that these tokens will primarily be sold to the market.

It is therefore expected that the strategy will generate a certain selling pressure on SKY which, if translated into price drops, would result in a decrease in remuneration in dollar terms for the capital deposited in DSR

Conclusions

The marketing strategy that involves the issuance of new Tokens with the aim of incentivizing the creation of new USDs to be deposited in the DSR is currently a loss-making strategy for the protocol. It would be necessary to change the DSR remuneration for it to have a positive impact. The strategy would require an increase in the price of SKY to make the extra rate remuneration more attractive, although the delivery of tokens will generate selling pressure that needs to be compensated. The strategy is aimed at investors attracted by profitability and may attract a mercenary type of investor, as opposed to other marketing strategies that could generate longer-term agreements or integrations without the need to be remunerated by the DSR. It would be interesting to study dedicating a part of this issuance to other different strategies and to analyze the impact of both.