Dai (DAI) is a dollar-pegged stablecoin. MakerDAO, DAI’s decentralized governance community, regulates its value to keep it stable. In addition to buying DAI stablecoins directly with fiat money (such as the US dollar) on most authorized crypto exchanges like Coinbase and Kraken.
Stablecoins are a subclass of cryptocurrencies that aim to reduce volatility. Stablecoins also offer the usual crypto features of safe transactions, rapid global transfers, cheap fees, and quick payouts.
It’s possible since a reserve currency or other asset backs DAI.
A decentralized exchange (DEX), like UniSwap or ByBit, allows users to exchange money or tokens easily. Coins operate on one blockchain, while tokens run on another. A permissionless transaction is where no third party brokers the deal. A DEX is based on a smart contract based on a blockchain. No credit check, no bank approval, no delays.
Creation of DAI Stablecoins
Maker Protocol is the DAI creator of Rune Christensen’s foundational system. Anyone in the world can create DAI stablecoins using a variety of cryptocurrencies. Ethereum (ETH), Compound (COMP), USD Coin (USDC), and Basic Attention Token (BAT) are all accepted as collateral.
One can buy DAI directly on centralized exchanges or DEXs. Using the Maker Protocol, you can borrow DAI and deposit Ethereum-based assets as collateral. DAI demands a more significant collateral deposit than DAI borrowed to ensure network liquidity. Your crypto-collateral will forfeit if its value falls below the value of the issued DAI tokens. However, your DAI borrowing limit is if your collateral improves in value. The Maker Protocol works like an escrow account, holding collateral until DAI and fees are refunded.
Due to being attached to the US dollar, DAI has transactional benefits with no volatility. DAI is an ERC-20 token designed for the Ethereum platform. Ethereum Request for Comment is the 2015 standard for creating and enabling smart contracts on the Ethereum network.
Due to DAI’s decentralized design, investors have free access to their cash. The permissionless and transparent method eliminates intermediaries, approvals, and credit checks. Other assets or fiat currencies may not be as liquid.
DAI Savings Rate
The DAI Savings Rate is another innovative interest-generating tool (DSR). It allows users can earn variable interest on idle DAI tokens during a lockup period. A DAI owner can also deposit tokens directly into a MakerDAO smart contract for passive income. The smart contract will add interest automatically. There is no minimum deposit and no maximum withdrawal.
Aside from regular audits, DAI’s secure integrated wallet and two-factor authentication ensure the ecosystem’s security. The MakerDAO community also verifies all blockchain smart contracts for liquidity and network sustainability.
You risk losing your overcollateralized asset if you borrow DAI on the Maker Protocol. Otherwise, the upside of this unique asset makes it a viable investment worth serious consideration.
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