What is DAI Stablecoin? Find Out Here

After the crash of so called stable coin UST and dragging down with it it's native token called LUNA the markets have quickly been trying to find new places to store their value. Storing value in stable coins is a nessasrly evil and replaces what banks are in terms of investing in the stock market.

When markets turn bad people move their money into more stable projects like interest, bonds and these all hold a stable value. As markets heat up investors and people move out of these safe havens back into riskier stocks. It's the same thing we are now seeing in the crypto space and these so called stable coins are a way to do that.

What Is DAI

Dai formerly known as Sai is a stable coin cryptocurrency on Ethereum that aims to keep its value as close to the USD as possible. It does this through smart contracts and decentralized means. It was created in December of 2017 and the white paper for it can be found at https://makerdao.com/en/whitepaper/ It was originally founded in 2014 under the name of Marker DAO but it wasn't until December of 2017 that it got attached to smart contracts.

I think it's important to note a few key things about stable coins such as this. They attempt to do their best at holding that USD peg it doesn't mean they have to.

It uses a collateral system which allows someone with $150 worth of ETH to take out 100 Dai as a loan. This is what is considered a overcollateralized loan, the repayment of this "loan" over time is what creates the value and printing of the token. The removal of this value then destroys the DAI thus retaining it's core value of pegging it to the USD.

It's governed by others via a decentralized system of voting for MKR token holders.

It's also expanded it's ability to accept other tokens for this collateral system outside of Ethereum such as COMP, USDC and BAT.

Benefits Of DAI

Passive Income - Is always a bit one of mine. With DAI you can earn interest on your DAI via DSR (DAI Savings Rate) which is a locking period of the DAI token.

Decentralized - It's one of the best cases of having a decentralized system this is a huge benefit when it comes to the prying overpowering and aggressive eyes of governments.

It's important to understand that every system built on the blockchain is through code in which a human has coded. That means it's not perfect and things can happen much like we saw happen with UST and LUNA. There are always risks with any investment and being that crypto is not FDIC insured like a bank is for a certain value you run the very real risk of losing it all. Always do your own research and also diversify over many tokens/stablecoins so if one crashes like UST it's not your life savings like we are seeing horror stories come out.