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DAI · 26w

The DAI after tomorrow: Limiting crypto volatility and disasters

In this article, we will cover what DAI is and how it is benefiting the crypto community.

The DAI coin is a stablecoin pegged to the dollar. This means it is a lot less volatile than other cryptocurrencies as it will not change price unless the dollar does. DAI differs from other stablecoins in that it is decentralised. Unlike other centralised coins, DAI is backed by collateralised cryptocurrency debit in the form of Ether. This makes it impossible for the coin to be shut down as there is no central authority required.

DAI was released in 2017 by Maker, a smart contract platform. Unlike other stablecoins that are backed by physical currencies, the DAI coin is not vulnerable because Maker itself uses decentralised governance, so there is no way for a government entity to steal a user’s funds or for a human error to occur that will compromise all funds.

How is DAI made?

The DAI stablecoin is a loan taken against Ethereum, meaning anyone who has some ETH has the ability to create DAI. This process used to be complicated and take a long time to execute. However, now with the creation of Maker’s dApp, the process is simple and fast. By connecting a wallet to the dApp, a user can easily create a collateralised debt position (CDP). Once this CDP has been made, it can generate some DAI that a user can spend and trade.

However, a user does not have to create DAI to be able to have it. Just as with any cryptocurrency, DAI can be bought on an exchange, and as long as it still holds its $1 value, a user can spend and convert the amount as much as they like.

Even though you can just go onto an exchange to purchase DAI and avoid the process of actually creating it, there are advantages to creating the coin yourself. If a user wants to get a loan and needs to have ETH as collateral, the DAI coin can be used for this. Another reason is that DAI is actually worth more than $1 when sold on. This means that when a user creates DAI it will cost...

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