What is DAI?
DAI is a decentralized stablecoin within the cryptocurrency ecosystem, designed to maintain a stable value against the US Dollar (USD). It operates on the Ethereum blockchain and is primarily governed by the Maker Protocol.
Key Features of DAI
- Stability: DAI is pegged to the USD, aiming to maintain an approximate value of $1, making it a reliable medium of exchange.
- Decentralization: Unlike conventional stablecoins backed by centralized issuers, DAI is governed by smart contracts and collateralized by various cryptocurrencies.
- Over-Collateralization: To mint DAI, users lock up collateral (like ETH) in a smart contract. This collateral exceeds the value of DAI minted to ensure stability.
Use Cases
DAI is commonly used in decentralized finance (DeFi) applications, enabling users to lend, borrow, and trade without relying on traditional banks. It offers advantages like users retaining control over their funds and reduced risk of inflation compared to fiat currencies.
Conclusion
As a pioneer in decentralized stablecoins, DAI plays a crucial role in the growing DeFi landscape, providing a stable and reliable financial instrument for users around the world.