DAI is a stablecoin, a type of cryptocurrency designed to maintain a steady value, built on the Ethereum blockchain. Its management and issuance are overseen by the Maker Protocol and MakerDAO, which is a decentralized autonomous organization.
DAI's value maintains a close relationship with the U.S. dollar, though it's backed by a variety of other cryptocurrencies placed into smart-contract vaults whenever new DAI is created.
It's crucial to distinguish between Multi-Collateral DAI and its predecessor, Single-Collateral DAI (SAI), which relied on just one cryptocurrency for collateral. SAI also lacked support for the DAI Savings Rate, which lets users earn interest on their holdings of DAI tokens.
The Multi-Collateral DAI version was introduced in November 2019.
Who Are the People Behind DAI?
One interesting aspect of DAI is that it wasn't developed by an individual or a small team of co-founders. Instead, the software responsible for its operation and the creation of new tokens is managed by MakerDAO and the Maker Protocol.
MakerDAO acts as a decentralized autonomous organization, which is a company run in a decentralized way using smart contracts—self-executing agreements coded into the Ethereum blockchain.
This organization is governed democratically by those who hold its Maker (MKR) governance tokens. Similar to owning shares in a traditional company, MKR holders can vote on pivotal decisions concerning the future of MakerDAO, the Maker Protocol, and DAI. The more Maker tokens they own, the greater their voting power.
The founding of MakerDAO dates back to 2015, led by a Danish entrepreneur named Rune Christensen. Before diving into the Maker ecosystem, Christensen studied biochemistry and international business in Copenhagen and established an international recruiting firm called Try China.
How Can Users Create Dai?
Dai has emerged as the second-largest decentralized stablecoin by market capitalization, recently surpassed by Terra's stablecoin, UST. Both are crypto-backed and dollar-pegged, unlike leading stablecoins like USDT, USDC, and BUSD, which are supported by traditional assets such as cash and bonds.
So, what backs Dai? It's a cryptocurrency collateral-based stablecoin, with a soft peg to the U.S. dollar. To generate Dai, users deposit crypto-assets into Maker Vaults through the Maker Protocol. Access to Maker Protocol and Vault creation is possible via Oasis Borrow or other community-built interfaces. On Oasis Borrow, users can lock in assets like ETH, WBTC, LINK, UNI, YFI, MANA, MATIC, and more. They can then borrow Dai against their collateral, provided it meets the collateral ratio requirements, which range from 101% to 175%, depending on the riskiness of the asset deposited.
Why is DAI Considered Unique?
The standout feature of DAI is its close alignment with the U.S. dollar's value.
The crypto market is infamous for its instability, with even major coins like Bitcoin sometimes experiencing wild price swings of 10% or more in a single day. In this volatile environment, traders and investors often seek stable assets to balance out drastic market changes.
Stablecoins, like DAI, serve this need. They're cryptocurrencies tied to more stable assets, often traditional fiat currencies such as the USD or EUR.
Another unique aspect of DAI is its governance. Unlike stablecoins managed by private companies, DAI is run by a decentralized autonomous organization through a software protocol. This ensures that all token creation and destruction is handled via publicly verifiable smart contracts on Ethereum, making the system more transparent and less susceptible to manipulation.
Moreover, the development of DAI's software is steered democratically, with decisions made through direct votes by active members of its ecosystem.
How Many DAI [DAI] Tokens Are Currently in Circulation?
New DAI tokens aren't generated through mining, as with Bitcoin (BTC) and Ethereum (ETH), nor are they released by a private entity like Tether (USDT). Instead, any user can mint new DAI using the Maker Protocol.
The Maker Protocol, operating on the Ethereum blockchain, regulates DAI issuance. To keep the dollar peg, the protocol ensures each DAI is backed by a suitable amount of other cryptocurrencies. Users can deposit their crypto into a "vault"—an Ethereum-based smart contract—as collateral and issue a corresponding amount of DAI.
There's no cap on the total DAI supply; it fluctuates based on the volume of collateral in the vaults. As of November 2020, there are about 940 million DAI in circulation.
How is the DAI Network Protected?
DAI is a token built on Ethereum, following the ERC-20 standard. It's protected by Ethereum's Ethash algorithm.
Where is DAI [DAI] Available for Purchase?
You can buy DAI tokens on a variety of online platforms, both in the decentralized finance space and on traditional cryptocurrency exchanges. These include:
- For DeFi token swaps:
- Uniswap
- Compound
- For conventional exchanges:
- Coinbase Pro
- Binance
- OKEx
- HitBTC
