Dai

What is Dai?

Dai (DAI) is a stablecoin based on ERK-20 token standard. It runs on the Ethereum blockchain. A stablecoin means that it is backed by fiat currencies rather than other cryptocurrencies. In particular, The Dai token is soft-pegged to the US dollar. as the largest stablecoin Tether. However, unlike Tether, Dai is completely decentralized.

In a broader sense, this means that the current price stability of DAI depends on custodians. Their role is to maintain stability by buying and selling Dai when the market price is below or above US$1. In addition, stability fees and the Dai Savings Rate (DSR) mechanism are used to maintain the stability of the stablecoin.

Dai belongs to MakerDAO ecosystem together with Maker Token (MKR). The latter is a utility token that provides management rights. Additionally, MKR is used to pay fees associated with Dai loans. Whereas Dai is the native sign of the Creator for everyday needs.

His Multi-provision, unlike its predecessor Sai with one collateral. This means that Dai-based loans can be backed by multiple cryptocurrencies. Sai was MakerDAO’s first stablecoin. A new updated version called Dai was introduced in November 2019.

Be sure to check the price of DAI in the chart above if you are planning to purchase this cryptocurrency.

How does Dai work?

Give me permission lending and borrowing cryptocurrencies in a decentralized way. It is similar in many ways to the traditional method of obtaining loans, except that Dai loans do not have any of the strict requirements that banks impose. All you have to do is deposit accepted crypto such as ETH or USDC into the Maker Vault and receive your Dai. No credit scores, credit history, cash flow, financial statements or any other personal information through KYC processes required.

To redeem the collateral, you must pay the exact amount of Dai owed in addition to the stability fee, i.e. the interest rate.

In addition to creating Dai by posting collateral to Creator’s Vaultyou can also purchase it through an exchange where you will have to take into account the current price of DAI.

What are the main features of Dai?

There are various advantages of Dai that put it ahead of other stablecoins in the market.

Let’s start with the most obvious aspect – decentralization. When asking what Dai is, you will most likely hear that it is a decentralized stablecoin. The key word here is decentralized, as there are stablecoins with a central authority. Decentralized stablecoins lack a central authority, which means they are governed by the community through public voting through the MKR token. Moreover, decentralization provides features such as increased transparency and censorship resistance. This is possible because all actions are recorded on the blockchain.

It’s no secret that the cryptocurrency market is extremely volatile. Therefore, when wondering what Dai is and how it can benefit you, you should consider this aspect first. Stablecoins such as Dai assistance in managing volatility. The value of Dai is softly pegged to the US dollar, which provides relative stability. This means that the price of DAI should be around 1 USD.

The creator uses Dai Savings Rate (DSR) Mechanism which serves as a source of passive income. This unique feature allows users to earn interest. This form of passive income is funded by stability fees.

Last but not least, Dai has inherent ability to build decentralized applications and make the source code available.

What is MakerDAO?

MakerDAO is decentralized autonomous organization where participants can take out crypto loans against collateral. It is based on the native stablecoin DAI and the governance token MKR.

Participants can generate their own DAI token by pledging into the Maker Vault. This collateral can be any type of cryptocurrency supported by the platform.

Who developed Dai?

Rune ChristiensenDanish-born entrepreneur, co-founded MakerDAO in December 2017. The Dai token and Maker token support the ecosystem.

Since Maker is a decentralized autonomous organization (DAO), it operates entirely without a central authority using smart contract technology.

This is where MKR comes to the rescue. This utility token serves as a governance token. MKR holders have a say in important decisions regarding the future development of MakerDAO.

This means that although Rune Christiensen originally founded the DAO, he does not have significant power over its development or token issuance.