DAI Coin is known as a stablecoin that is quite popular in the Crypto market today, because of its stability, clear development plan. However, what is DAI Coin exactly, how are they used and should invest in this DAI Coin? To get the answer, follow all the articles and information below.
What is Dai (DAI)?
Dai (or DAI, formerly Sai or SAI) is a stablecoin cryptocurrency on the Ethereum blockchain which aims to keep its value as close to one United States dollar (USD) as possible through a system of smart contracts and the decentralized participants which those contracts incentivize to perform maintenance and governance functions. Dai is maintained and regulated by MakerDAO, a decentralized autonomous organization (DAO) composed of the owners of its governance token, MKR, who may vote on changes to certain parameters in its smart contracts in order to ensure the stability of Dai. Together, Dai and MakerDAO are considered the first examples of decentralized finance to receive significant adoption.
By locking other crypto assets in a Smart Contract (smart contract), DAIi is seen as an ERC-20 token that maintains a stable price 1:1 to USD.
Unlike other valuable stablecoins, issued and controlled by central authorities, DAI is the native token of the Maker Protocol platform – a decentralized autonomous ecosystem of Smart Contracts operating on Blockchain blockchain.
Background of Dai
MakerDAO was formed in 2014 by Danish entrepreneur Rune Christensen.
- On December 18, 2017, Dai and its associated smart contracts were officially launched on the main Ethereum network.The price of Dai was successfully kept close to one US dollar during its first year of existence, even though the price of Ether, the only collateral available at the time, declined by more than 80% during the same time period.
- In September 2018, venture capital firm Andreessen Horowitz invested $15 million in MakerDAO by purchasing 6% of all MKR tokens.
- In 2018, MakerDAO formed the Maker Foundation, run from Copenhagen, which serves to help bootstrap the ecosystem by, for example, writing code needed for the platform to function and adapt.
- In 2019, MakerDAO experienced internal struggle over whether it should integrate more with the traditional financial system. Christensen wanted greater regulatory compliance to allow for assets besides cryptocurrency to serve as collateral for Dai. The struggle led to the departure of MakerDAO’s CTO.
- In March 2020, as a result of extraordinary market volatility at the onset of the COVID-19 pandemic, Dai experienced a deflationary deleveraging spiral that, at its peak, caused it to trade for up to USD $1.11[citation needed] before returning to its intended $1.00 valuation.
How Does Dai Work?
DAI coin is different from other stablecoins because it is decentralized (decentralized). Instead of having an agency/institution that backs the value of DAI with actual holdings of US dollars, like Tether (USDT) or USD Coin (USDC), DAI is backed by collateralized crypto debt, In this case it’s Ether. This is significant since it implies that, similar to other cryptocurrencies, DAI cannot ever be stopped and relies on no middleman.
This is very significant because: Some other stablecoins, most notably Tether, have been involved in the debate surrounding its management business Bitfinex, and they do not have enough USD to support USDT.
Therefore, the absence of a governing organization is the reason why DAI coin is safer. DAI is not vulnerable. There’s no way the Maker can steal your money, there’s no way for a government organization to tax your money, and there’s no way anyone can encroach on your DAI holdings. This is all thanks to smart contracts on the Ethereum blockchain.
Read more: Difference Between WETH Vs ETH 2023? And What Is Wrapped Ether (WETH)?
What Problems Does Dai Solve?
Dai is a decentralized stablecoin that solves the problem of price volatility. Dai is pegged to the US dollar and maintains its value through a system of collateralized debt positions (CDPs). CDPs are smart contracts that allow users to lock up collateral in exchange for a loan in Dai. The Dai Stablecoin System is designed to stabilize the price of Dai at $1.00 USD.
Besides being a stable math method, DAI also provides investors with tools to reduce risk. In times of market volatility, investors can deposit their funds into DAI to minimize asset loss. In addition, DAI offers access to mortgage loans that have a number of benefits over competing products.
The Dai Team
The Dai team is a decentralized autonomous organization (DAO) that’s responsible for the development and maintenance of the Dai stablecoin. The team consists of several different entities:
- The Maker Foundation was launched in 2017 and is the primary organization behind the Dai stablecoin. It is also the largest holder of MKR, the governance token for the Maker protocol. Was launched in 2017 and is the primary organization behind the Dai stablecoin. It is also the largest holder of MKR, the governance token for the Maker protocol.
- POA Network is a public sidechain built on the Ethereum network. It is used by the Dai team to issue Dai on the Ethereum mainnet.
The Dai team is a great group of people. They’re brilliant, dedicated, and hard-working. And they truly believe in the Dai vision. We’re proud to have such an amazing team, and we’re excited to see what the future holds for Dai.
Partnerships
There are partnerships with a number of companies, including MakerDAO, an entity that focuses on creating decentralized organizations on Ethereum. The partnership between Maker and DigixDAO was announced by MakerDAO in November 2017.
In September 2018, DigixDAO became the first Ethereum token to be added to Binance’s Trust Wallet. The Trust Wallet is a wallet created by Binance. It is not just a wallet, but a service that allows you to buy, sell, convert cryptocurrencies and interact with decentralized applications (dApps).
What Is DAI Token?
Basic Information About DAI
- Ticker: DAI
- Blockchain: Ethereum
- Token Type: Stable Token
- Token Standard – Standard: ERC-20.
- Circulating Supply – Circulating Supply: 7.26B DAI
- Total Supply – Total Supply: 7,260,204,992
- Max Supply – Max Supply: $48,328.84
- 24 hour Trading Vol – 24 hour trading volume (August 16, 2023): $659,583,633
Read more: TOP 10 Best ERC20 Coins To Trade & HODL In 2023: A Full Guidance Of Potential Crypto For Traders
Market Capitalization
At the time of writing this article, the market capitalization of DAI coins was $7,258,708,494 on August 31, 2023
Circulating Supply
The Dai coin is the native token of the Maker platform. The circulating supply of Dai is currently about 1.5 billion coins and the total supply is capped at 2 billion coins.
How Is DAI Backed?
DAI is backed by Ethereum as collateral. When someone wants to create DAI, they need to lock up some ETH in a smart contract as collateral. They can then draw on this line of credit by transferring DAI to another address, up to the value of the ETH they have locked up.
To redeem their ETH, they just need to pay back the DAI plus a small stability fee. If the price of ETH falls and the value of the collateral drops below a certain threshold, the smart contract will automatically liquidate the position to prevent it from going into debt.
Types Of DAI On Blockchains
Below it is the list of a few current prominent DAOs for you to have an overview of how they work in practice.
Ethereum
Ethereum is a DAO with a Proof of Work mechanism, i.e. incentives to enjoy fees and block rewards for miners, in return miners need to perform operational activities such as mining new blocks, confirming transactions, securing guarantees. network security. Even when upgrading to Ethereum 2.0 with the Proof of Stake model, this principle remains unchanged as stakers will be the party to confirm the transaction and ensure the security of the network in return.
Besides, miners have the right to vote on Ethereum’s development proposals (EIP), it can be said that the future development of Ethereum depends on the decision of the components in the DAO.
Compound
Compound is a very successful protocol for on-chain governance. By allowing token holders to vote on proposals in the protocol, along with the launch of the COMP token on June 15, 2020, Compound has a clear growth plan from which to continue. maintains its position as one of the leading lending platforms.
How to Buy DAI Tokens?
As of August 2023, Dai can be traded in the following exchanges:
- Binance
- Coinbase
- FTX
- Uniswap
- HitBTC (paired with BTC, ETH, USDT, TUSD, XRP, EURS, LTC, XMR, NEO, POA, EOS, BCH).
- Coinsuper, Kyber Network (paired with ETH).
- Exmo (paired with USD, RUB, BTC, ETH, MKR).
- Bancor (paired with BNT).
- Radar Relay (paired with WETH, MKR, ZRX, OMG, REP).
- Gate.io (paired with USDT).
- HitBTC (paired with BTC, ETH, USDT, TUSD, XRP, EURS, LTC, XMR, NEO, POA, EOS, BCH).
- Bitfinex, Ethfinex (paired with USD, BTC, ETH).
- Coinhub (paired with BTC, ETH, LTC).
How to Store DAI Coins?
Both DAI and Makercoin are Ethereum ERC20 tokens and can be stored in ERC-20 compliant wallets like MyEtherWallet, Atomic, Exodus, Jaxx, Mist, Metamask, and others. For an extra layer of security, you can also use hardware wallet by Ledger or Trezor.
What Are The Risks Involving In DAI?
There are risks involved in DAI that include potential loss of capital, lack of liquidity, and potential manipulation of the price or the lack of customer support, and the lack of regulation.
What happens If DAI Collapses?
If DAI collapses, it will no longer be able to maintain its peg to the US dollar. This could lead to a loss of value for DAI, and could also lead to a loss of confidence in the cryptocurrency.
The Crash of UST and its Impact on DAI
When UST crashed below $1.00, it became subject to a “stability fee” of 13.5% that was designed to incentivize users to buy back the token and stabilize its price. However, due to the severity of the crash, many users were unable to buy back their tokens and the price of UST continued to decline. As a result, the UST-to-DAI exchange rate fell from 1:1 to 0.86:1, meaning that each DAI was only worth 86% of its original value.
This decline in the UST-to-DAI exchange rate had a direct impact on the value of DAI. While 1 DAI was originally worth $1.00, it was now only worth $0.86. This meant that users who held DAI saw the value of DAI.
Advantages and Disadvantages
Outstanding advantages of stablecoin DAI:
- No minimum account required: Any user can participate in owning DAI without having to secure a minimum amount of assets.
- Stable value: DAI can provide an alternative stable cryptocurrency, including financial ones, to citizens living in areas of severe economic uncertainty.
- Unlimited decentralization: Operating on the Smart Contract chain, DAI provides a transparent system that ensures users have unrestricted access to their assets.
- Bring in income: Through the DAI savings rate system, participants can use DAI tokens to earn an additional source of income by depositing DAI into the MakerDAO smart contract. Since DAI is built on Ethereum, leveraging the network’s own consensus mechanism, DAI does not have its own staking mechanism.
- Low transaction costs: DAI opens up transaction space for users with low cost, fast processing time. Global transactions from one user’s wallet to another are much more transparent and efficient.
- High level of safety: The developers of the MakerDAO system were able to verify all the smart contracts and underlying protocol mechanisms that constitute the internal structure of the system, ensuring strong security of the platform.
Some disadvantages of DAI:
- DAI is subject to greater USD price volatility than centralized stablecoins because it is collateralized by a volatile asset, Ethereum.
- DAI is only listed on a few major exchanges and doesn’t have many trading pairs compared to centralized stablecoins like USDT and USDC.
- DAI is collateralized with Ethereum, a much more volatile asset than the US Dollar. So holding DAI is more risky than holding between other centralized stablecoins.
FAQs
Why DAI instead of USD?
DAI is a decentralized stablecoin that is backed by Ethereum and other crypto assets. This makes it a more stable and resilient currency than USD, which is subject to inflation and central bank manipulation.
DAI is a cryptocurrency that is backed by the US dollar. This means that each DAI is worth $1 USD. This makes it a stablecoin, which is a type of cryptocurrency that is designed to maintain a stable value.
How Does DAI Stay at $1?
The value of DAI is pegged to the US Dollar. 1 DAI is always worth $1 USD. The peg is maintained through a system of collateralized debt positions (CDPs). Users can lock up ETH in a CDP to generate DAI. The stability of the peg is ensured by the fact that there is always more collateral locked up in CDPs than there is DAI in circulation.
If the price of ETH falls and the value of DAI falls below $1, the system automatically liquidates CDPs to buy ETH and stabilize the price. If the price of ETH rises and the value of DAI rises above $1, the system automatically sells ETH and buys DAI to stabilize the price.
The system is designed to keep the price of DAI stable at $1.
How to earn DAI tokens?
Some methods for earning DAI tokens include participating in decentralized finance (DeFi) protocols, providing liquidity to DeFi protocols, or earning interest on DAI deposits.
Read more: TOP 10 Best Defi Coins To Trade & HODL In 2023: A Complete Lists For Crypto Traders
Why is Dai popular?
Dai is popular because it is a decentralized stablecoin that is pegged to the US dollar. This means that it is less volatile than other cryptocurrencies, making it a good choice for those looking to store value or make payments. It is also popular because it is built on the Ethereum blockchain, which is a popular blockchain platform.
What can I buy with DAI?
Some popular items that can be purchased with DAI include:
- Cryptocurrencies
- Precious metals
- Fiat currencies
- Commodities
- Real estate
- Other assets
How can I find more information about Dai?
You can find more information about Dai on our website and in our blog Covemarkets.com or join the website Dai.com
Conclusion
Through the information shared above, you must have somewhat understood more about “What is Dai (DAI)?” and how to own DAI Token effectively. If you are looking for a capital-saving option that limits market fluctuations, Dai is a pretty great choice. However, you should take the time to learn and consider carefully before investing!
Disclaimer: The information provided in this article is not investment advice from Cove Markets. Cryptocurrency investment activities are yet to be recognized and protected by the laws in some countries. Cryptocurrencies always contain financial risks.
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