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Description
What is Dai?
Dai is the native stablecoin for the Maker protocol. It is the world’s first crypto-collateralized and decentralized stablecoin, whose value is soft pegged to the US Dollar. The collateralized assets backing Dai are other cryptocurrencies instead of fiat and are held within smart contracts rather than in institutions.
What is Maker?
Maker is a smart contract lending platform that enables users to take out loans by locking-in collateral in exchange for Dai. It was founded by the Maker Foundation in 2015 as an open-source project to offer economic freedom and opportunities to anyone, anywhere. In 2017, it launched the Maker governance token (MKR) and its first stablecoin iteration known as the Single Collateral Dai (SAI), which used Ether (ETH) as collateral.
Two years later in 2019, the Foundation released the Multi-Collateral Dai (DAI), phasing out SAI. The platform has enjoyed widespread adoption and is the largest decentralized lending platform with around $2.58 billion in total value locked (TVL), as of December 2020.
What can Dai (DAI) do? Dai has several strong benefits and use cases. Most notably, Dai’s soft peg to the US Dollar helps mitigate price volatility. In the cryptocurrency space where price swings are common and dramatic, this feature helps preserve Dai’s value and promotes its use as a medium of exchange.
Additionally, the stablecoin’s decentralized nature means that it is highly composable with other decentralized applications (Dapps) such as Compound, Uniswap etc. It also provides greater transparency and censorship resistance compared to centralized solutions.
The source code for the protocol can be viewed freely by anyone who wishes to do so. Dai holders can also save their Dai and earn interest through the Dai Savings Rate (DSR) mechanism. Further reading on Dai’s benefits and use cases can be found in Maker’s whitepaper and ecosystem page.
Where and how do I obtain Dai?
There are two main methods to obtaining Dai: i) buying it from an exchange and ii) opening a Maker Vault. For the first method, users can head to an exchange such as Coinbase. You can find Dai trading on various centralized and decentralized cryptocurrency exchanges via the link provided. This page’s market tab also shows a list of all the exchanges that are trading Dai pairs.
The second method involves locking-in collateral in the Maker protocol’s smart contracts known as Maker Vaults. To get started, users should head over to Oasis, connect their wallet, and follow the relevant instructions.
The amount of Dai minted will depend on two factors: i) the amount of collateral locked-in and ii) the chosen collateral’s collateralization ratio. For instance, if a user chooses Ether (ETH) as collateral and the collateralization ratio of ETH is 150%, then the user would need to lock-in 1.5 ETH for every 1 Dai he/she mints.
Obtaining Dai in this manner thus incurs debt and an interest fee known as the Stability Fee. Importantly, should a Maker Vault owner fail to maintain his/her collateralization ratio, the vault may be liquidated, and a liquidation penalty imposed. More information on how to open a Maker Vault, as well as on Stability Fees can be found here.
What cryptocurrencies can I use as collateral?
Maker provides a list of cryptocurrency assets that can be used as collateral on Oasis’ borrow tab. As of December 2020, there are 16 supported assets, each with their own differing collateralization ratios and stability fees. The addition of new collateral assets, as well as the determination of collateralization ratios and stability fees are decided through voting on Maker’s governance platform.
How does Dai work?
In principle, Dai is similar to a loan or mortgage. In traditional finance, these credit facilities are obtained from financial institutions upon fulfilling several stringent requirements such as the provision of sufficient collateral, robust credit scores and compliance with KYC and criminal background checks. The key differences with Dai however, is that only collateral in the form of cryptocurrencies is needed, and Dai loans are issued in a decentralized manner via smart contracts.
The stablecoin’s soft peg to the US Dollar is also another distinguishing feature, maintained through supply and demand auctions, the Dai Savings Rate (DSR) and Stability Fees. For instance, if Dai >$1, users would be incentivized to mint more Dai and lock-in additional collateral. The minting of more Dai will increase its supply and thus, bring Dai’s value back to its target price.
The DSR and Stability Fees can also be altered to incentivize less/more Dai given if prices remain sticky. The inner workings of Dai’s soft peg can be read on its auction documentation here, as well as briefly in the whitepaper.
Where can I learn more about Dai?
To learn more about Dai and the Maker platform, you may watch CoinDesk’s introductory video on ‘How MakerDAO works’ here:
24 hour trading pattern
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One year trading pattern
Max Price chart
Dai price today is $1.00 with a 24-hour trading volume of $1,103,065,890. DAI price is up 0.2% in the last 24 hours. It has a circulating supply of 7.2 Billion DAI coins and a total supply of 7.14 Billion. If you are looking to buy or sell Dai, Hotbit is currently the most active exchange.
Dai hit an all time high of $1.22 on Mar 13, 2020 (about 2 years).
Dai had an all time low of $0.903243 on Nov 25, 2019 (over 2 years).
The 24 hour trading volume of Dai is $1,103,065,890.
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