DAI Price Update
The price of DAI (DAI) today is $1.0107 USD, which has increased by 0.000196 (0.02%) over the last 24 hours. The total number of DAI coins in circulation stands at 904,862,650 and $2,255,063 USD has been traded for the DAI/USD pair across exchanges over the last 24 hours.
DAI is the world’s first decentralized stablecoin.
Created by MakerDAO – a permissionless lending system – Dai is a stablecoin, meaning that one Dai is equivalent to one US Dollar. However, unlike other stablecoins like Tether (USDT) or US Dollar Coin (USDC), Dai is backed by other cryptocurrencies like Ether, rather than by an equal amount of fiat currency held by a trusted third party.
Dai is issued through smart contracts using Oasis Borrow, with Dai being created when borrowers deposit collateral. Dai must be overcollateralized, ensuring that there is always more value backing the currency than what is being borrowed. Key concepts surrounding the Maker Protocol and Dai creation include:
- Vaults – Where collateral is stored to open a loan and create Dai via Oasis Borrow.
- Collateralization Ratio – The ratio of collateral to the amount of a Dai being borrowed. Maker requires a minimum 150% collateralization ratio on all Vaults.
- Dai Savings Rate – A passive savings opportunity which is earned when Dai is stored through Oasis Save.
- Stability Fee – A debt which accrues on all outstanding loans.
- Liquidation Fees – A fee which is charged if a Vault is liquidated due to the Collateralization Ratio falling below 150%
With Multi-Collateral Dai, Maker added support for collateral beyond Ether, including popular ERC20 tokens. Moving forward, it is likely that Maker will introduce support for trusted real-world assets such as treasury bonds, real-estate and stock certificates.
When borrowing Dai, users incur an annual debt in the form of a Stability Fee. This debt can be repaid in either DAI or in MKR upon the closing of a Vault.
Borrowers have the ability to leverage passing savings through the Dai Savings Rate, in which Dai that is stored via Oasis Save automatically earns an annualized interest. Dai stored via the Dai Savings Rate can be deposited or withdrawn at any time with no fees or delays.
Dai Value Proposition
As a leading stablecoin, Dai is unique for the following reasons:
- Permissionless – Anyone can create Dai without permission from Maker.
- Trustless – All issuance happens through smart contracts, rather than relying on Maker to manually create Dai.
- Decentralized – Dai is backed by a diverse pool of cryptocurrencies.
Seeing as cryptocurrencies have historically suffered from volatility, Dai’s stable value allows companies to leverage the power of cryptocurrencies without having to worry about price fluctuations. In practice, many decentralized applications have added support for Dai as means to offer stability directly in-app.
The Dai Savings Rate has emerged into the risk-free-rate for decentralized finance, with many exchanges and products incorporating the DSR as a way for users to earn a passive income on their Dai holdings. In doing so, Dai serves a vital role as the defacto stablecoin for the growing DeFi ecosystem.
Dai’s peg is held through burn and mint mechanics. When Dai is created through Vaults, the outstanding supply increases by the amount being borrowed. When the Vault is closed (meaning that all Dai has been repaid plus a Stability Fee) Dai is burned and effectively removed from the supply.
This is contrary to a lending service like Compound, in which circulating Dai is simply being stored and lent out an existing pool, rather than being created and burned through Maker smart contracts.
The cyclical burn and mint nature ensures that there is always a sufficient amount of collateral backing Dai at any given time. In rare instances where Dai breaks it’s peg, traders stand to take advantage of arbitrage by selling Dai whenever it is trading for more than $1, and by buying Dai whenever it is trading below a dollar.
Lastly, MKR token holders – Maker’s native governance token – effectively act as a means of last resort in the event of rapid price crashes. In the event that that value of the collateral backing Dai were to suddenly crash, MKR is sold on the open market with proceeds being used to purchase Dai up until it retains its peg.
Multi-Collateral Dai will invite exchanges to integrate the Dai Savings Rate into their products, enabling users to capture annualized interest without having to interact with Oasis Save.