Dai

What is Dai (DAI)? 

Dai (DAI) is a layer 2 decentralized, unbiased, collateral-backed stablecoin built on Ethereum Blockchain (ERC-20). This stablecoin is soft-pegged to the US dollar, which works on smart contracts and is most commonly used as a pair currency in trading. 

Found in 2017 by Rune Christensen, a Danish entrepreneur, DAI is managed and governed by the MakerDAO community through decentralized governance (MKR holders). It functions similarly to fiat currencies, such as a store of value, a medium of exchange, a unit of account, and a standard of deferred payment. 

As Dai is a stable medium of exchange, it can be utilized for purposes such as debt repayment, cross-border transfers, and payments for goods and services. Traditional financial services often make sending money internationally costly and slow, but Dai offers a more efficient alternative.

Additionally, users can loan out DAI stablecoin from “Maker Vault” by using any Ethereum-based asset as collateral, provided it has been approved by the MKR holders who oversee MakerDAO. The loan that users borrow has a predetermined collateralization ratio, ranging between 110% and 200%. Some of the crypto-backed collateral includes ETH, ZRX, and OMG, among several others.

DAI users can also earn interest by utilizing the Dai Savings Rate (DSR) feature within the Maker Protocol. This allows Dai holders to automatically accumulate savings by locking their DAI into the DSR contract. 

Who is the founder Of DAI?

DAI was founded in 2017 by current CEO Rune Christensen and is managed and governed by the MakerDAO community through decentralized governance (MKR holders).

The Maker Protocol

Maker is a protocol described as “Multi-Collateral-DAI(MCD), which aims at providing stability within the cryptocurrency economy. This is achieved by utilizing a dual token system, which is MKR and DAI, where

• MKR is the governance token for the protocol that allows holders to vote in various aspects that may impact the functioning of the protocol. 

• DAI Stablecoin functions as a protocol collateral-backed stablecoin.

How Does Dai Work?

DAI is generated and burned through an overcollateralized loan and repayment system managed by MakerDAO's smart contracts. There are two ways to generate DAI.

• By depositing approved Ethereum-based collateral assets into the Maker Vaults (formerly known as Collateralized Debt Position). This is how Dai is entered into circulation and how users can mint the DAI coin as a loan. To retrieve the collateral and close the smart contract, users have to pay back the equivalent amount of DAI that was issued, along with the applicable stability fee. 

• Buying it from exchanges or simply receiving it as a payment.

When Dai is generated or bought, it is used the same as other cryptocurrencies, which includes transactions, buying of goods and services, or sending to other users. 

MakerDAO, a decentralized organization, governs the ecosystem using the MKR tokens. The MKR token holders vote for various aspects such as collateral types, technical upgrades, risk parameters, and more. Apart from DAO, the Maker protocol also involves some external entities to maintain the operations; they are 

• Keepers: Provide liquidity by engaging in arbitrage activities, like participating in auctions while Maker Vaults are liquidated.

• Oracles: Decentralized nodes that provide real-time price information on collateral assets in Maker Vaults to know the time of liquidation. 

• Oracle System Module (OSM):  a security layer that delays the price feed by one hour so that it is time for holders to vote on freezing the coin in case of any attack. 

• Global settlers (Secondary Oracles): These are members voted by MKR holders who act as a last line of defense, as they have the authority to trigger an “Emergency Shutdown” during any critical threats to the system.

History of the DAI Protocol

MakerDAO, the company that maintains DAi Coin, was established in 2014 by Danish Entrepreneur Rune Christensen. 

In 2018, the Maker Foundation was founded in Copenhagen to fund the projects on the system. In September 2018, venture capitalist Anderson Horowitz purchased a total of 6% of the MKR token by funding $15 million in MakerDAO. 

On December 18, 2017, DAI was launched as a “Single-Collateral-DAi (SAI)” on the main Ethereum network. The price of the coin was kept close to one US dollar for one year of its existence. Only ETH coins were accepted as collateral. 

On November 19, 2019, DAI evolved into Multi-Collateral-DAI (MCD), with the ability to use various crypto assets as collateral.

DAI was launched on December 18, 2018, on the main Ethereum network, where the coin price was kept close to one US dollar. 

The price of Dai (DAI) was $3.67, reaching its all-time high on November 16, 2021, and its all-time low of $0.882, which was recorded on March 11, 2023.

The supply cap of the coin is based on how much collateral is stored in every CDP on the network at any given moment, keeping it in constant flux.

Is DAI stablecoin safe?

Dai is one of the most trusted stablecoins in the Defi network; as of October 2024, DAI is ranked as the third-largest decentralized stablecoin by market cap, trailing only behind USDT (theater) and USD (USDC coin).

Dai is one of the safest stablecoins out there, due to its multi-collateral and hybrid algorithmic nature. It has a safety mechanism called “Oracle System Module” and “Global Settlers,” which act as a last line of self-defense by freezing coins and performing an emergency shutdown in case of a threat. This ensures DAI’s stability and security even during extreme market volatility.

Where to buy DAI Coin?

As of October 2024, the DAI coin is listed in more than 30 exchanges, of which 15 are CEX and the remaining are DEX. Some of the top exchanges by market cap include Binance, Coinbase, Kraken, Kucoin, Bitfinex, etc.

Some CEX Exchange platforms where DAI is listed include Binance, Kraken, Coinbase, Gemini, etc.

And DEX includes UniSwap, SushiSwap, CurveFinance, Balancer, and many more. 

Some exchanges that are available to the US markets that have listed the DAI coin are Binance, Kraken, Gemini, Bitfinex, and more.

Wallets that support the DAI coin

As of 2024, many wallets support. Some of the popular wallets include

• MyEtherWallet
• Atomic Wallet
• Exodus
• Jaxx 
• MetaMask, and many more.