Dai (DAI) is a stablecoin cryptocurrency that operates on the Ethereum blockchain.
Dai has become one of the leading stablecoins in the cryptocurrency market due to its decentralized nature, stability, and use within the DeFi space. It was created by the MakerDAO decentralized autonomous organization (DAO) and launched in December 2017.
Dai is designed to be a stablecoin, which means its value is pegged to the US Dollar (USD) on a 1:1 basis. Its stability is achieved through an autonomous system of smart contracts that regulate the supply of Dai in response to changes in demand.
Collateralized system of Dai
The stability of Dai is maintained through a collateralized system. To create new Dai, users must lock up other cryptocurrencies (initially, only Ether was accepted as collateral) as collateral in a smart contract called a “Collateralized Debt Position” (CDP).
The smart contract ensures that the value of the locked collateral is higher than the value of the generated Dai.Dai is widely used in the decentralized finance (DeFi) ecosystem, where it serves as a stable medium of exchange, store of value, and unit of account.
Maker DAO
MakerDAO operates as a decentralized autonomous organization (DAO), where MKR token holders participate in the governance and decision-making process. MKR holders are responsible for voting on proposals related to the protocol’s parameters, including adjustments to the stability fee and collateral requirements.
The MakerDAO system uses decentralized oracles to obtain external price information about the underlying collateral assets. Oracles help determine the value of the collateral and ensure the stability of the system.
The MakerDAO system and the supply of Dai are transparent and auditable, with data available on-chain for public inspection. But if the DAI price shifts too far from a dollar, MKR tokens are created or burned to stabilize the price.
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Source: https://coinidol.com/dai-dai-token/
