The Dai (DAI) is a stablecoin cryptocurrency that aims to maintain its value at one US dollar. MakerDAO maintains and regulates it through, its decentralized governance community. MakerDAO, which created and officially launched the Maker Protocol in 2017, was founded in 2015 by Rune Christensen.

DAI Symbol On A Trading Page
Source: AS

How does it work?

The DAI is a product of the Maker Protocol, an open-source software that runs on top of the Ethereum blockchain. Unlike other stablecoins that are backed by a dollar reserve, the Dai is backed by other cryptocurrencies through collateralized debt denominated in ether (ETH), Ethereum’s cryptocurrency.

The Maker Protocol runs smart contracts and lets borrowers lock ETH and other crypto assets in order to generate new tokens. In order to recover the locked ETH, borrowers have to return the DAI and pay a fee. The Maker Protocol takes the collateral and sells it using its market-based auction mechanism in the event of liquidation.

Unknown parties in the network cannot alter the DAI supply. Instead, it is maintained through a system of smart contracts that respond when certain terms are met.

DAI Historic Price Chart

What are the advantages of DAI?

There are many advantages that Dai has over its competitors. Here are some of them:

  1. Stability – Assets back it. These assets help reduce the typical risks associated with cryptocurrencies, especially its volatile nature. The Dai also reaps the benefits of cryptocurrencies, like secure transactions, instant transfers around the world, lower fees, and speedy settlements. It is important to note though that Dai prices can still fluctuate.
  2. Decentralized. – investors do not need intermediaries, approvals, or credit checks to access their funds. Its decentralized finance design gives Dai investors more freedom to choose how to manage their own funds. This means that instead of a centralized governing body, anyone who is an MKR holder can help govern the Maker Protocol.
  3. Secure. – Dai’s secure integrated wallet has many security features that boost the security, including two-factor authentication and routine authentication. MakerDAO developers also verify all smart contracts on the blockchain so that liquidity and network viability is always a guarantee to the client.  
  4. Use for money transfers – Because the value of is pegged at one dollar, it is a good cryptocurrency to use for money transfers. Because it is a stablecoin, the amount the sender transfers stays relatively the same by the time the receiver gets it. Another use is, the transfer of funds between crypto exchanges because many exchanges support it.

Overall, DAI is a very good cryptocurrency. It is the first currency without bias that you can use anytime and anywhere. It also provides huge amounts of flexibility, utility, and stability. 

***This is not financial advice. All information presented is for educational purposes.

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