Dai Coin DAI
Dai Coin is a decentralized cryptocurrency with a stable exchange rate against the US dollar. Created with the stable Makers (MKR) Dai system. Margin trading is used to adapt to market conditions and maintain its value in major currencies around the world. Unlike other stablecoins, its value can only be publicly visible on the Ethereum blockchain. Instead, it has encryption safeguards.
CreatorDAO (MKR) created Dai, a stable decentralized token. One Dai is equal to 1 USD (1 to 1) and will continue to do so until it is removed.
Dai’s clever and clever way of maintaining stable value has no central trust. It changes with market movements and maintains a fixed price with another cryptocurrency. Together with the Maker platform, MKR tokens, CDP smart contracts, and other stability mechanisms, the Maker Platform makes this process possible. There is no central agency to oversee fiat-secured stablecoins, such as Tether (USDT), nor is it backed by any traditional banks. Dai is entirely based on the Ethereum blockchain and its smart contract technology, which is a decentralized, untrusted stable coin that cannot be reviewed or locked out.
What is DAI Coin?
DAI is a decentralized cryptocurrency created and controlled by Maker DIO (Decentralized Independent Organization). It is a stable currency because its value can be quietly pegged to one US dollar. As of July 2021, it is the fourth largest stablecoin by market capitalization, at 5.5 billion dai.
DAI can be purchased from any major exchange, such as Kraken or Coinbase, as well as decentralized exchanges. You can deposit fiat currency, exchange it for DAI, or sell your crypto assets.
You can also use the Oasis Borrow 1 widget from Maker DAO to create and borrow a DAI. Additionally, you can open a Maker collateral Vault through the Maker DAO Oasis Borrow Dashboard and deposit Ethereum-based mortgage assets. It works the same way as a traditional collateralized loan.
If you choose to return the borrowed DAI, your warranty will not be frozen and fees will be charged. Dai is a decentralized stablecoin that uses smart contracts. You will learn more about it later.
The same principles of supply and demand apply to crypto-assets. The face value of the DAI is $1. Maker DAO is raising loan rates to encourage customers to dump Dai. The reason for the price increase is that the supply of returned Dai is restricted due to the destruction. When DAI becomes less than $1, the exact opposite mechanism occurs.
Maker DAO is the owner of the agreement and can make changes to the Dai smart contract. This includes controlling the type of collateral accepted, the mortgage rate, and the interest rate at which Dai is borrowed or stored.
This is how decentralization can be. All participants in the blockchain can see all the changes made to the smart contract. Therefore, Dai fully embraces the transparency, reliability, and trustworthiness of the blockchain.
How Does DAI Maintain Its Value?
Dai uses game theory and balances economic incentives to maintain the value of $1. If the price of one Dai falls below $1, the system will encourage users to increase the price. If Dai’s value exceeds $1, the incentives will go the other way. Price fluctuations can help rational participants make money on any of these occasions. Dai also deviates from the mean, which means there is a better incentive to bring the price down to $1.
Dai coins can also be over-guaranteed. This means that its assets (Ether) back the tokens with a ratio of 1:1, and the ratio is always higher than 1:1. If the value of Ether is $100 and the mortgage rate is 150%, you can generate 66 Dai.
USDT and USDC may be other stable currencies that you have heard of. These codes are issued and regulated by the management company. This makes it difficult to decentralized cryptocurrencies.
Tether is the issuer of USDT. The tether must ensure that each USDT token is minted with US dollars at the bank. This means that every token generated there must be backed by real money.
Tether was accused of creating unsupported tokens in 2017-18. Tether has also been accused of using the token to buy Bitcoin and manipulating its price. Tether even accidentally issued a $5 billion stablecoin in 2019 but quickly destroyed it.
Center, the company that issued the USD Coin stablecoin, has gained some popularity. After receiving a law enforcement request, it blacklisted an Ethereum network account worth $100,000. Since the center created the title first, they had a certain control over the title and could freeze it. This is impossible on a truly decentralized blockchain like Bitcoin.
For tokens like USDT and USDC, these issues are to be expected. Since the company is physically in control of it, we will not review it well or force it into the blockchain.
On the other hand, DAI is independent. Its issuance is controlled by smart contracts. These programs are stored on the blockchain and are immutable. It is impossible for any legal institution or individual to interfere with Dai’s currency or address.
DAI is also supported by cryptocurrencies. DAI is an “exaggerated” token. This means that the collateral value of the crypto-asset exceeds the loan amount (usually 50%). Given the volatility of cryptocurrencies, Maker has agreed to this compromise.