Updated: Dec 20, 2019
Dai is a token offered by MakerDAO (MKR) platform, and it successfully stands out from the rest by constantly linking the rate to the value of fiat currency, which means 1 DAI equals to $1. The token is positioned as a cryptocurrency and is expected to solve the high volatility problem of electronic cash. However, unlike other stable coins whose value gets backed directly by US Dollars, this crypto coin’s value is backed by crypto collaterals, which can publicly be viewed on the Ethereum blockchain.
This guide will talk about what DAI is designed for its purpose, the team behind it, and various uses and applications.
What Is Dai Designed For?
MakerDAO designed DAI to be a cryptocurrency, which is truly trustless and offered a decentralized stable coin, making it impossible for it to be shut down or censored. Other popular fiat-collateralized stable coins, like Tether (USDT) require centralized authority and a traditional banking system to back it.
However, DAI was created to exist in a completely decentralized manner by employing an approach that is both clever and interesting. The coin shifts successfully and efficiently according to market trends, and changes to keep a steady price against other active cryptocurrencies.
Who Is the Team Behind Dai?
The Maker organization is one of the oldest Ethereum-focused companies, working on DAI since before Ethereum was launched. The team comprising of developers, economists, and designers from all over the world are very-well regarded in this space and is also backed by Vitalik Buterin, who is the creator of Ethereum.
The founder and CEO of MakerDAO, Rune Christensen, is also the co-founder of Try China. Other notable names in the leadership team include Steven Becker, Wouter Kampmann, and Jeremy Hollister.
How Does Dai Work?
The working of Dai is a very straightforward process. A user can employ a special smart contract to turn his Ethereum tokens into PETH (Pooled ETH). The allocated ETN tokens are then blocked, in return of which, the user acquires the right to issue a specified number of DAI coins. These DAI tokens can then be further used to acquire other crypto coins.
The process of emission is the main advantage of DAI, where a user can at any given point of time use a smart contract to create a collateral position by providing ETN (exchange token Electroneum) as the collateral, and issue the necessary amount of DAI.
Unused DAI tokens can be converted back into ETH by using the same smart contract. These DAI coins are burned out following which, users acquire a corresponding volume of Ether.
MakerDao has ensured complete transparency, reliability, and honesty in the stable coin platform, as compared to other major stable coins, such as Tether (USDT). It is virtually impossible to issue uncontrolled DAI tokens, without exchanging them with another crypt.
The blockchain uses PoI (proof of intelligence), which makes mining impossible. Instead, the cryptocurrency is issued with collateral. The decentralized cryptocurrency is stabilized against the value of USD, by using margin trading to respond positively to changing market conditions.
What are Current and Future Applications of Dai?
DAI can be purchased on numerous cryptocurrency exchanges, including Bittrex, Coinbase Pro, and HitBTC, where they can be traded for BTC, ETH, and other altcoins. Exchanging DAI for fiat currency can be a bit problematic since only a limited number of exchanges, such as EXMO, Ethfinex, and Sistemkoin support it.
There are multiple webs, desktop, and mobile wallets available that support DAI, including Coinomi, MyEtherWallet, Ethereum Wallet, MetaMask, and Exodus.
The cryptocurrency can be used in the following ways:
DAI offers a safe harbor to store value during periods of high market instability, and prevent the need for exiting the crypto space
Users can spend their DAI tokens at merchants accepting crypto at point of sale
● Prediction markets
Long term trading can become less-feasible if users need to predict the price of the very asset they are wagering
Dai’s low volatility creates a certain lending environment, and the token acts as a perfect medium for issuing a stable, predictable loan
● Instant global transfer
Dai is effective in reducing the costs of international trade and the supply chain by ensuring safe transactions, lending stable capital, and brokering cross-border initiatives.
The proof that the Dai approach works, is evident in the fact that the value of 1 DAI has consistently remained equivalent to the worth of $1. Faith in DAI is only expected to increase as the coin successfully maintains its peg to USD.
The history of DAI provides the trust a user needs. Plus, the coin is already considered a game-changer in crypto circles. It allows USD to be transferred almost instantly across borders, in a manner, which is without any fees or interference.
Dai has enabled a new era of virtual commerce that purely exists within the blockchain network and cannot be shutdown.