Everything you need to know about Dai Coin

Dai is one of several stablecoin companies loosely pegged to the US dollar, hoping to make a cryptocurrency not volatile enough for day-to-day trading.

The Ethereum-based design strives to harness the benefits of blockchain technology, but avoids the dramatically volatile prices of the broader cryptocurrency market.

While there are a handful of stablecoins struggling for traction, its proponents see Dai as best positioned to deliver a decentralized version capable of truly fulfilling Bitcoin founder Satoshi Nakamoto's original aspiration for blockchain technology.

Find out more about how Dai works and if it is worth investing in.

What is Dai?

Dai is a cryptocurrency based on the Ethereum network. It is a stablecoin, which means that the Dai is pegged to the US dollar, resulting in lower price volatility compared to other blockchain-based currencies. Low volatility also makes it resistant to hyperinflation like the one seen in Venezuela in recent years.

The Dai stablecoin system was the brainchild of Danish businessman Rune Christensen, who first introduced it as an eDollar in a reddit post in 2015. The white paper introducing the world to the "Single Collateral Dai" wasn't published until December 2017.

Maker Foundation was the name of a team of engineers and open source employees who began to build and grow the Dai coin and ecosystem. One of the Foundation's goals was to decentralize the governance of Dai, driving the growth of MakerDAO (DAO in MakerDAO stands for "Distributed Autonomous Organization").

MakerDAO is a collective of engineers and members encouraged to govern and monitor the stability of the Dai over time.

In July 2021, CEO Christensen announced the full decentralization of MakerDAO and the dissolution of the Maker Foundation.

Dai special features

Dai is by no means the first or the largest of the stablecoins. Launched in 2014, Tether, another stablecoin pegged to the US dollar, had a market capitalization almost 11 times that of Dai in July 2021.

While it may not be the largest stablecoin, due to the autonomous governing body MakerDAO, Dai claims to be a truly decentralized stablecoin.

MakerDAO members make currency determinations, including the variable Dai Savings Rate (DSR). Dai holders can earn a transfer or savings if they lock their tokens on the DSR smart contract.

Similar to the monetary policy of the US Federal Reserve For the US dollar, the MakerDAO also changes the savings rate to cushion or increase demand to keep the value of the currency stable.

Other parameters of the ecosystem can also be changed to meet community needs through the governance process.

Each of the ecosystem maintainers has some of the separate ecosystem governance tokens, called MKRs. This governance token is used to vote on the parameters of the ecosystem and is completely independent from Dai itself, so as not to distort the MakerDAO incentives.

Anyone can propose a change to the ecosystem, but only MKR holders can vote. The weight of any vote in a system-wide decision is directly proportional to the amount of MKR that a maintainer bets on his vote.

So the more money a MakerDAO member uses to vote, the more likely they are to skew the result in her favor. MKR holders can submit a proposal to a larger community vote to find consensus before voting.

How to mine Dai

Dai is not mined like most cryptocurrencies.

Unlike Bitcoin, where, once the 21 million bitcoins have been mined and are in circulation, all the bitcoins that will exist in the universe will be there, the supply of Dai is neither predetermined nor strictly limited, which is part of how the coin can stay. stable.

To increase the supply, instead of minting new blocks, Dai is created when someone uses collateral to take out a loan from the community, or MakerDAO. On the other hand, Dai is destroyed when these loans are repaid.

This constant gust, always in tune with demand, ensures that there is never more in the ecosystem than is necessary for the currency to maintain its value.

Fees and expenses

Each type of collateral has its own stability rate determined by MakerDAO. This means that as long as someone has a security to take the Dai, a small amount of interest in the Dai accrues annually on the value of the security.

The Balance does not provide tax, investment or financial advice or services. The information is presented without regard to the investment objectives, risk tolerance or financial circumstances of any specific investor and may not be suitable for all investors.

Past performance is not indicative of future results. Investing carries risks, including the possible loss of capital.

We hope you enjoy watching this video about Dai Coin 

Source: Coin Bureau

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