Dai, one of the world’s largest stablecoins, is at the heart of blockchain-based financial applications. Dai can be used to save, lend and borrow without the need for a middleman. As a result, some of the most favorable interest rates are found with the Dai stablecoin. This guide will take you through the steps necessary to purchase Dai.
Best Exchanges for Buying Dai
The easiest way to buy Dai is through an exchange using US Dollars, Euros, Pound Sterling or other fiat currencies.
Let’s take a look at some of the most trusted exchanges that support Dai purchases.
As a leading exchange in over 100 countries, Coinbase prides itself on making cryptocurrency purchases easy for nontechnical users. With an intuitive dashboard along with detailed guides on how to get started, many new users will look to Coinbase as the best way to buy Dai.
The fees at Coinbase vary between countries, however debit and credit card purchases have a 3.99% fee attached. Bank transfers are often the best route to buying Dai on Coinbase, with no fees on deposits and just a 1.49% fee on purchases.
Users wishing to minimize their fee further can also use the “Pro” version of the exchange where fees start at 0.50% and decreasing with volume. However, this method adds a little more complexity to buying Dai and should only be used by experienced traders.
- Highly trusted since 2012
- Available to users in a vast number of countries
- User-friendly design built for new investors
- Sizeable fee depending on country
As a leading exchange based in the United States, Kraken offers dozens of markets for a number of the largest cryptocurrencies. For Dai, Kraken supports the DAI/USD, DAI/EUR and DAI/USDT trading pairs, making it one of the few reputable exchanges that allow users to acquire Dai with the Euro.
Fees at Kraken start at 0.26% and decrease with volume traded. Please note that purchases on Kraken require some understanding of exchange trades and does not come with the same simplicity to that of Coinbase.
- Multiple fiat currencies accepted including the Euro
- Restricted access in the US
- Trading only, no "instant buy" function
Bitfinex, another popular exchange similar to Kraken, also supports Dai purchases. Unlike the first two exchanges, Bitfinex does not offer the ability to trade directly from fiat to Dai. Instead, Bitfinex offers token trading pairs such as MKR/DAI, OMG/DAI and ZRX/DAI.
These pairs tend to have low liquidity, causing significant slippage for purchases. Unless explicitly required, it is recommended that users buy Dai through another means.
- Niche Dai market pairs for those who need it
- Low liquidity
- No fiat currency pairs
For the more technically minded, Uniswap is one of the best places to buy Dai using any of the top Ethereum tokens.
With Uniswap, users can buy Dai using any token which has liquidity on the exchange. This include tokens like ETH and MKR all the way through to others such as BAT and LINK.
Uniswap is an Ethereum-based exchange that uses smart contracts to store liquidity. Users are able to swap between currencies in a matter of seconds and without a 3rd party custodian.
It is not possible to buy Dai with fiat currency (USD, EUR, GBP etc) on Uniswap.
- Huge range of Ethereum trading pairs
- No fiat trading pairs
- Low liquidity for a number of niche assets, resulting in high slippage
What is Dai?
With the advent of the Dai Savings Rate, users can earn an annualized return by sending Dai to an Ethereum smart contract.
Dai is pegged to the dollar, meaning that 1 Dai is equal to 1 dollar. Unlike other stablecoins, whose pegs are fixed via dollar bank deposits, Dai uses a floating peg that is maintained by a governance mechanism. Maker, the project responsible for this governance mechanism, hosts a weekly executive poll which dictates a number of parameters that effect the supply and demand for Dai – helping to maintain the peg.
In tandem with Stability Fees – or debt which is incurred when users create new Dai through Maker Vaults – the protocol mains the peg by moderating either supply or demand through different interest rates.
Regardless, users can be confident that Dai will retain it’s $1 peg, making it a great asset to earn and calculate passive interest as there is no risk of large price volatility like many other cryptocurrencies.
Step-by-step Guide to Buying Dai
For most investors, buying Dai with a fiat currency like US Dollars, Euros or Pound Sterling will be the easiest way to acquire the stablecoin. The following example uses the Coinbase exchange to buy Dai with US Dollars. The same steps can be followed for any other fiat currency supported by Coinbase.
1. Login to Coinbase and navigate to the DAI asset page.
2. On the right hand side, select “Buy” and add a payment method if you have not already done so.
3. This will open a pop up which will allow users to purchase Dai with various payment methods. Users can select different options by clicking on the “Pay With” Tab. Please note that all Dai orders must be larger than $1.99 on Coinbase.
4. After entering an amount, users will have the ability to preview their buy which shows the amount of Dai being purchased along with Coinbase’s service fee.
Once the “Buy now” button has been pressed, Dai will immediately be credited to your account, however there is a maximum period of 3 days before the Dai can be sent to another wallet.
Buying Dai with USDC
For those based in the United States, an alternative method for buying Dai is available and one which has the advantage of being more liquid (ideal for larger purchases).
Coinbase’s stablecoin – USDC – is also pegged to the dollar and can be used to buy Dai on the platform. Acquiring USDC can be done in a similar way to Dai, with the advantage of having more liquidity than that of the Dai trading pair.
Note that USDC – while also stable – cannot be used to access the same financial applications that Dai can. For anyone looking to use Dai to earn passive income or save in the Dai Savings Rate, it’s important to convert USDC to Dai.
Let’s walk through how to buy USDC before swapping it for Dai.
1. Login to Coinbase and navigate to the USDC asset page.
2. Use the right hand side of the page to Buy USDC using fiat currency.
3. Preview the buy and place an order. Note that Coinbase does not charge any fee for purchasing USDC.
4. Using the newly acquired USDC, select the “Convert” tab and choose USDC as the “From” asset and Dai as the “To” asset. Once converted, Dai will become available in the Coinbase account being used.
Dai Price History
What are the fees for purchasing Dai?
Depending on the exchange being used, there will likely be a small fee associated with the purchase of Dai. Service fees are generally higher on beginner exchanges like Coinbase and lower on more niche exchanges like Uniswap. Similarly, market orders typically incur higher fees than limit orders.
Fees can also manifest in the form of a premium on the price of the asset. While Dai remains roughly stable to the US dollar, some exchanges may add fractions of a sent to its price and take profit on the difference. Be sure to check the price of Dai or use a price calculator to double check that the quoted rate is a fair one.
It’s common for the most fees to be incurred when purchasing Dai directly with fiat currencies, as most exchanges of Dai for other Ethereum-based assets mainly incur the cost of a transaction fee which is usually a couple cents as most.
On Coinbase, the fee for credit/debit card purchases is 3.99% and the fee for buys made via bank transfer are set at 1.49% in most countries. These fees are fairly typical for user-friendly exchanges like Coinbase but can become prohibitive for larger purchases of Dai.
How can I reduced the fee for buying Dai?
While it is possible to reduce fees by navigating to a decentralized exchange (DEX) like Uniswap, it is not advisable for new users as the complexity of doing so is likely not worth the cost savings. DEX usage is recommended for those who already own Ethereum assets and are looking to make larger purchases where the savings can be substantial.
To reduce fees when buying Dai, users can instead use exchange platforms like Coinbase Pro or Kraken. These platforms provide traders with much greater flexibility over their orders but their usage requires some additional learning. Trading fees via a “pro” platform start from as little as 0.26% on Kraken or 0.50% on Coinbase Pro and are typically reduced with volume traded. Traders looking to make large purchases of Dai with fiat currency should consider learning how to use platforms like Coinbase Pro.
For uses in the United States, buying USDC (as described above) before then converting it to Dai is a great way to avoid Coinbase’s service fee and is worth considering.
What other routes are available to buying Dai?
On exchanges like Coinbase, users can select “From” Ether and “To” Dai to convert directly from ETH to DAI.
It is also possible to buy Ethereum before then using ETH to trade for DAI. ETH trading pairs are often the most liquid (meaning they have the least slippage) across all exchanges that support Dai. On exchanges like Coinbase, users can select “From” Ether and “To” Dai to convert directly from ETH to DAI with ease.
A similar route can be taken via a decentralized exchange like Uniswap, where users can select Ether as the “In” asset and Dai as the “Out” asset to convert ETH to DAI.
Interacting with decentralized exchanges
To use a decentralized exchange a user must first install a web3 “browser wallet” like MetaMask. Read more about web3 wallets here.
In fact, Dai’s most liquid trading pairs are actually on decentralized exchanges, largely favoring sophisticated users who use Dai to take advantage of emerging sectors like decentralized finance.
Generally speaking, an Ethereum DEX incurs very small fees with limited slippage when exchanging with ETH, meaning it is a safe avenue for ensuring traders are getting the value when trading into Dai.
The one major drawback of using ETH to buy Dai is in the price volatility of ETH. This volatility leads to significant exchange rate risk and any benefit from a fee being saved can be quickly wiped out by a declining ETH/DAI price.
How can I send Dai to another wallet?
Sending from an exchange
DAI addresses are Ethereum-based, meaning that the address can accept any Ethereum token or ETH. The defining feature of an Ethereum address is that it starts with “0x”, however you should always check and double check that the address you are sending to is the one specified by the receiver.
With the address confirmed, create a withdrawal from the exchange in question and copy and paste the receiving address into the address field. Double check again that you are sending DAI and that the address matches what was specified by the receiver. Once you are happy, click send.
Dai transactions incur a small network fee, meaning that a few cents will be deducted to process the transaction on the Ethereum network.
Coinbase also allows Dai to be sent to an email address, meaning that the receiving party will have to accept the transfer and set up their own Coinbase wallet to receive it.
Sending from MetaMask
When sending Dai from a wallet like MetaMask, click the “Send” and input the Ethereum address where the Dai will be sent.
Next, users will click on “Assets” and select Dai.
From here, users enter the amount of Dai they wish to select a transaction speed – slow, average or fast. All transactions using MetaMask require Ether (ETH) to be used as gas to process the transaction.
Once the amount and speed have been selected, a separate prompt will open requiring confirmation.
Once the transaction is confirmed, it is added to the pool of transactions to be processed relative to the speed that was selected. The progress of a transaction can be easily monitored by searching for the recipients Ethereum address in a block explorer like etherscan.io.
How do I use the Dai Savings Rate?
One of the most compelling reasons for buying Dai is in being able to earn the Dai Savings Rate (DSR), a deposit contract that has played a significant role in the success of the Dai stablecoin.
The DSR acts as a permissionless savings account where anyone can participate with as much or as little Dai as they choose. Interest is paid every 15 seconds with no fees and withdrawals can be made at any time.
While the governance mechanism behind the Dai Savings Rate has drawn criticism for its centralization and potential to be hacked, the smart contracts responsible for the DSR are highly secure with a strong audit history. Deposits in the DSR earn interest without the user ever having to release custody of the underlying Dai.
The DSR is one of the many mechanisms used by Maker to help Dai retain its peg to USD, meaning that the interest rate changes regularly over time. So far this interest rate can be as low as 2.00% and as high as 8.75% with the majority of its time being spent around 7.00%. All changes are automatically applied, meaning users do not have to manage their funds to take advantage of any interest rate changes.
Dai has a floating peg to 1 US dollar. While it tends to fluctuate by fractions of a cent, 1 Dai can be thought of a $1.
Dai is available at dozens of exchanges throughout the world with varying limits on buying and selling. In instances where access to DAI trading pairs is restricted, it is possible to buy Ethereum to then swap the purchased ETH for DAI at a decentralized exchange.
By using a decentralized exchange, anyone in the world with a computer and an internet connection is eligible to buy DAI.
Ethereum transactions (and that includes Dai transactions) are public. While these transactions do not carry any personally identifiable information, they can still be traced and, in some instances, personal details can be revealed.
As a result, Ethereum mixers like Tornado.cash have grown in popularity, allowing users to effectively hide their transaction history.
Purchases of Dai can be made anonymously using decentralized exchanges.
There are multiple ways to earn passive income with Dai. The largest alternative to the Dai Savings Rate is Compound Finance, which offers similar lending rates to Dai through the use of cDai (Compound’s version of Dai).
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