DAI
Dai is a decentralized stablecoin
Stablecoins are cryptocurrencies that peg their value to another asset. Many of the top stablecoins, including Dai, are tied to the U.S. dollar. Here are a few of Dai's biggest stablecoin competitors:
Tether (USDT)
USD Coin (USDC)
Binance USD (BUSD)
Unlike those and most other stablecoins, Dai is decentralized. A decentralized autonomous organization called MakerDAO maintains Dai.
While other stablecoins have a central organization working to keep the price steady, Dai's price is maintained through smart contracts, which are programs that can execute themselves when certain conditions are met.
It's backed by other cryptocurrencies
Another way that Dai is unique compared to other U.S. dollar stablecoins is what's backing it. These stablecoins typically claim that every coin is backed by $1 or a $1 equivalent in a reserve.
Dai, on the other hand, is backed by other cryptocurrencies. At the time of writing, the largest cryptocurrencies backing Dai are USD Coin, which backs 62% of every Dai, and Ethereum (ETH), which backs 29%. You can see a full breakdown on the "What's backing my DAI?" webpage.
This is one of the potential risks of Dai, as not all its reserves are stable assets. Its position was especially precarious in March of 2020, after Ethereum lost over a third of its value in a single night. MakerDAO even considered an emergency shutdown of Dai. If that had happened, Dai holders would have needed to redeem their coins for Ethereum.
After surviving that issue with Dai intact, MakerDAO decided to add USD Coin to the mix of reserves. That's why such a large portion of Dai is backed by USD Coin now.
The price can fluctuate
People sometimes get the idea that stablecoins pegged to the U.S. dollar always maintain their value. It's important to realize that this isn't quite how it works.
Stablecoins like Dai attempt to maintain a value of $1, but there can be fluctuations here and there. Dai's price has both exceeded $1.10 and gone under $0.90 for brief periods of time.
The smart contracts that manage Dai usually correct these fluctuations quickly. So, if you can purchase Dai when the price is below $1, you're getting a good deal. If the price is above $1, it's better to wait until it has been corrected to make your purchase.
Ressources
https://share.streamlit.io/tadzz/maker_dai_collateralization_2/main/dai_collateral_app.py
https://makerdao.com/en/
https://oasis.app/daiwallet/dai
https://blog.makerdao.com/makerdao-has-come-full-circle/
Stablecoins are cryptocurrencies that peg their value to another asset. Many of the top stablecoins, including Dai, are tied to the U.S. dollar. Here are a few of Dai's biggest stablecoin competitors:
Tether (USDT)
USD Coin (USDC)
Binance USD (BUSD)
Unlike those and most other stablecoins, Dai is decentralized. A decentralized autonomous organization called MakerDAO maintains Dai.
While other stablecoins have a central organization working to keep the price steady, Dai's price is maintained through smart contracts, which are programs that can execute themselves when certain conditions are met.
It's backed by other cryptocurrencies
Another way that Dai is unique compared to other U.S. dollar stablecoins is what's backing it. These stablecoins typically claim that every coin is backed by $1 or a $1 equivalent in a reserve.
Dai, on the other hand, is backed by other cryptocurrencies. At the time of writing, the largest cryptocurrencies backing Dai are USD Coin, which backs 62% of every Dai, and Ethereum (ETH), which backs 29%. You can see a full breakdown on the "What's backing my DAI?" webpage.
This is one of the potential risks of Dai, as not all its reserves are stable assets. Its position was especially precarious in March of 2020, after Ethereum lost over a third of its value in a single night. MakerDAO even considered an emergency shutdown of Dai. If that had happened, Dai holders would have needed to redeem their coins for Ethereum.
After surviving that issue with Dai intact, MakerDAO decided to add USD Coin to the mix of reserves. That's why such a large portion of Dai is backed by USD Coin now.
The price can fluctuate
People sometimes get the idea that stablecoins pegged to the U.S. dollar always maintain their value. It's important to realize that this isn't quite how it works.
Stablecoins like Dai attempt to maintain a value of $1, but there can be fluctuations here and there. Dai's price has both exceeded $1.10 and gone under $0.90 for brief periods of time.
The smart contracts that manage Dai usually correct these fluctuations quickly. So, if you can purchase Dai when the price is below $1, you're getting a good deal. If the price is above $1, it's better to wait until it has been corrected to make your purchase.
Ressources
https://share.streamlit.io/tadzz/maker_dai_collateralization_2/main/dai_collateral_app.py
https://makerdao.com/en/
https://oasis.app/daiwallet/dai
https://blog.makerdao.com/makerdao-has-come-full-circle/
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