DAI is a stablecoin that is designed to maintain a stable value of one US dollar. Unlike traditional cryptocurrencies, the value of DAI is not subject to the same level of volatility as other cryptocurrencies such as Bitcoin or Ethereum.
The DAI stablecoin is issued by the MakerDAO protocol, which is built on the Ethereum blockchain. It is collateralized by other cryptocurrencies, such as Ether (ETH), which are locked in smart contracts on the Ethereum blockchain. This collateralization mechanism helps to maintain the value of DAI at or near one US dollar, even in times of market volatility.
Users can obtain DAI by locking their cryptocurrency assets as collateral on the MakerDAO platform, and then minting DAI against this collateral. The collateralization ratio must be maintained at a certain level to ensure the stability of the DAI stablecoin.
One of the key benefits of DAI is that it can be used for decentralized applications (dApps) and smart contracts that require a stable value. This makes it a useful tool for decentralized finance (DeFi) applications, such as lending and borrowing platforms, where stablecoin values are important.
Overall, DAI represents an important innovation in the cryptocurrency space, offering a stable value alternative to other volatile cryptocurrencies. Its use of collateralization and smart contracts make it a useful tool for decentralized finance applications and for users who require a stable value for their transactions.
The article does not constitute financial advice.