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Dai (DAI) is known for being one of the first stable coins. It is a peer-to-peer digital currency that ensures low volatility of price. Dai appeared in 2017 to fulfill the market’s need for stable coins. This coin is supported by Ethereum and has a sustainable value that relates to American dollar (one Dai is equivalent to $1). Dai functions on a smart-contract platform called Maker. Today, stable coins are perceived as promising assets that have all chances to replace traditional tokens as well as centralized payment systems.
As we have already mentioned, Dai is a crypto-collateralized stable coin tied to dollar. Here is how collateralized coin works. When you need to get $300 of DAI, you have to make a deposit in Ether of $600. This way, if Ether will fall in price for 50%, your coin will be backed up, since you have already overpaid. At the same time, if Ether falls completely, you will lose everything, too. This is why some critics claim that stable coins tied to cryptocurrency are even less efficient than those tied to fiat money.
DAI functions on the platform called Maker. This resource is based on the smart contracts. This technology can be perceived as an advanced version of blockchain that controls and stores the transfers of funds. Due to smart contracts, you can add additional conditions to the transfer you make which is impossible in a traditional blockchain. These conditions cab describe the desired time, date and other specific notifications.
CDP is the core contract at Maker. They function similarly to the bank loans but use digital coins instead of fiat money or any other valuable objects. The smart contract regulates the process and makes sure that your deal is legal. If you invest Ether, you can receive DAI. At the same time, if Ether fails, you will lose your DAI as well.
The platform for Dai coins can bring significant improvements to the central financial system. Maker doesn’t provide users with DAI coins that come out of thin air, instead they let them borrow the coins against other valuable assets. These assets are better guarantees that are used by the central banks.
Also, in contrast to central banks, DAI users get loans from the Maker platform and do not need to communicate with the third parties.
Today, DAI has all chances to gain more popularity among the Internet users and become the most efficient consumer-grade stable coin on the web. Currently it doesn’t have any competitors that can boast of such stability level as DAU has. The coin developers believe that this is going to be the first stable asset and application that will bring cryptocurrency and blockchain to the mainstream use.