It is worth bearing in mind that DAI, which is used as a loan, generates an interest rate for the holders, but also does not yield a profit. The borrower has a certain value of DAI, and if that value falls, the borrower must repay it as collateral to cover the difference. If the value of your crypto security falls below the value issued in DAI tokens, it will expire.
The current version of DAI is an updated version of a stable coin called Multi-Collateral DAI, which makes it possible to use several types of cryptocurrencies to create DAI. Nevertheless, it is important to remember that DAI was originally a stable coin of its creator MakerDAO and that it was linked to the price of the US dollar. Since then, the price has been heavily backed by a mix of other cryptocurrencies, which are stored in a smart vault every time a new Dai is minted.
The biggest difference between DAI and other solutions is that DAI uses a decentralized platform to inverse cryptocurrency prices to the dollar. The makers of the protocol allow the world to produce DAI stablecoins that use a variety of cryptocurrencies as collateral. While its predecessor, the Single Collateral DAI (SAI), had only one cryptocurrency (ether) as collateral for its loans, the DAI as we know it today has a number of cryptocurrencies.
Unlike Bancor (BNT), DAI is a cryptocurrency designed as a basket of currencies. Created by the makers of the Protocol and backed by a surplus of collateral, its decentralised, stable DAI coin is softly pegged to the US dollar. In a volatile world where cryptocurrencies are volatile, DAIs stablecoin allows users to store their value without giving up the cryptocurrency space.
Dai is a stable cryptocurrency whose aim is to maintain its value as close as possible to a US dollar (USD) through an automated system of intelligent contracts on the Ethereum blockchain. The idea behind the Dai stable coin is simple: every Dai is worth one US dollar. The Dai (DAI) cryptocurrency has built a reputation as the world’s most successful currency against the dollar.
Dai is a stable Ethereum coin with stable price and issue and development of cryptocurrencies, managed by MakerDAO (Maker Protocol), a decentralized autonomous organization. It is a useful stable coin that is pegged to the US dollar to reduce volatility and enable multiple DeFi functions such as lending, borrowing and trading. Dai is an ERC20 token on the Ethereum blockchain which has a constant value of one US dollar.
While most stable coins are tied to the value of a physical asset, DAI crypto differs slightly. One of DAI’s main applications is the stable hedging or counterweight to the volatility of popular cryptocurrencies such as Ethereum and Bitcoin. But it is also a bit different, because it is not a traditional cryptocurrency, which is theoretically highly volatile.
Stablecoins such as DAI aim to do this because they are backed by a reserve currency other than the underlying asset. A cryptocurrency, DAI, is pegged to the US dollar and runs on the Ethereum blockchain. To maintain a soft peg to the dollar, the Maker protocol, which runs on Ethereum’s blockchain, ensures that DAI tokens can be adequately backed with other cryptocurrencies.
Using the Maker protocol, you can borrow DAI by laying Ethereum-based assets as collateral to secure the DAI loan amount. Users who deposit ether (or other cryptocurrencies that accept collateral) can borrow the value of their deposits by generating DAI. In this way, the USD value of the DAI is hedged by USD values of the collateral that MakerDAO owns with Smart Contracts.
A DAI token is worth as much in the United States as it is in Argentina, and in an inflation-crippling world, it can be exchanged without interference from central banks or third parties. This means that DAI and ERC20 cryptocurrencies can be converted into other ether-compatible coins. DAI is a stable coin that is softly pegged to the US dollar and backed by surplus collateral locked in the vaults of the manufacturers.
I can imagine a future in which we all store our assets in Bitcoin and other cryptocurrencies and DAI transfers them around the world. Remittances sent by people working in industrialised countries to people in developing countries are a logical use for the DAI. It facilitates transfers and does not lose its value during the currency conversion process.
DAI founders and makers believe they have solved the liquidity problem in the DAI stable coin system. The more projects integrate DAI functions into DAI, such as DSR, the more people will use the stable coin and more decision-makers and the ecosystem will grow.
If you want to know whether the DAI coin itself can remain in value against the dollar, it is up to MakerDAO to conclude a series of intelligent contracts. When the DAI price fluctuates below a dollar, Maker MKR tokens are burned and created to stabilize the value of the coin. The DAI Stablecoin offers stability in the volatile world of cryptocurrencies.
Stable coins such as DAI are one of the examples of cryptocurrencies whose price is linked to an asset with stable value in a traditional fiat currency such as USD or EUR. CVIX, which takes into account what is happening in the cryptocurrency market, has been shown to increase the correlation between bitcoin price transactions and the dominant cryptocurrency, thereby having a profound impact on the market, including DAI. If this continues and does not happen, we will see that the value of the DAI cryptocurrency will not fluctuate greatly, at least compared to other unstable cryptocurrencies.