DAI Stablecoin In Defi Project

Various stablecoins in cryptocurrencies, one of which is the DAI stablecoin in the Defi project. This is a stablecoin that is unique when compared to other stablecoins which are mostly pegged to flat currencies.

Maybe you are familiar with USDT, USDC, PAX, or BUSD whose value is pegged to 1 USD, or it is only pegged to one asset. In contrast to DAI, it has many types of assets for a pegged price.

DAI stablecoins are not managed by private companies, but rather as decentralized autonomous organizations via a software protocol. Let’s learn more about DAI stablecoin from MakerDAO.

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What is DAI Stablecoin?

DAI is a stablecoin that has a pawn-like concept. When you provide collateral to the pawnshop, you get an amount of money according to the value of the collateral.

And when you take back the collateral you have to pay the same amount of money plus fees. DAI is a stablecoin token released by MakerDAO and runs on an Ethereum-based protocol.

Token DAI  is different from other stable coins owned by certain entities and they use USD backups. DAI is trying to maintain a precise 1:1 ratio with the US dollar.

DAI Coin uses other cryptocurrencies as collateral which are stored in vaults. Users generate DAI by depositing into Maker Vault using collateralized cryptocurrencies such as ETH, USDC, BAT, wBTC, COMP, and more.

About Maker DAO

Maker DAO is an Ethereum based system that allows users to create DAI tokens, which are pegged at 1 USD. In the DAO maker system, there is no single entity that is responsible. Governance is owned by participants using MKR.

MKR holders have voting rights on changes to be made to the protocol. The protocol governance responsibilities are carried out by the stakeholders as a distributed network holding the MKR tokens.

The system in Maker DAO uses smart contracts which maintain efficiency and allow this game to maintain a stable value. It allows using DAI to transfer other users even to purchase goods that accept payment with DAI. This is generally the same function as other crypto tokens.

Why does DAI use crypto as collateral?

DAI uses smart contracts in the process, users pledge a certain amount of crypto to get DAI. The crypto is locked until you return the DAI you borrowed to get your collateral back.

The concept is different from other stablecoins that use flat money to buy the token. While DAI is not owned by a managing entity, it uses smart contracts in managing the DAI procurement process.

To keep the DAI ratio stable at $1, smart contracts use over-collateralization. Simply put, to get a number of DAI tokens the user has to pay more than he gets, this aims to maintain stability when the price of the crypto drops.

The concept is similar to a pawnshop, you pledge goods to get a loan, with an amount below the value of the goods.

How does DAI stablecoin work?

How DAI works using ERC-20 tokens. You can buy them through centralized exchanges and decentralized exchanges (DEX).

Then, you can create and borrow DAIs by opening Maker’s collateral vault via MakerDAO’s Oasis Borrow dashboard, and then you can deposit assets in the form of Ethereum as collateral.

Maker collateral vaults, or collateralized debt positions, are smart contracts that can keep collateral in escrow. Until the nominal amount of the borrowed coins can be paid.

The value of the collateral you deposit must always exceed the value of the DAI your issue. In the case value of the collateral falls below the value of the issued DAI token. Its collateral will be liquidated.

In the blockchain ecosystem, DAI is one of the most integrated digital assets. Besides being able to be borrowed, DAI can also be used in Defi applications, blockchain-based games, and so on.

Is DAI a good stablecoin?

DAI is the best stablecoin for traders, financial institutions, and exchanges. Even though it uses smart contracts, the DAI value is relatively stable instead of other stablecoins.

Some of the advantages of using DAI include:

Stable Value

If you hold altcoins that generally have volatile changes, in the long term DAI is better and capable to maintain its value pegged to 1 USD.

Decentralized system

DAI has no governing party. This makes it more transparent and helps to ensure that traders and investors have greater unrestricted access to their own investments.

Efficiency

Using DAI, processing time will be much faster and more efficient. That way, global transactions from one user’s wallet to another become much more transparent and efficient.

Strict Security

MakerDAO systems have an extensive audit and research system to ensure robust protocol security. The development team uses mathematical analysis. So they can verify all the smart contracts and underlying protocol mechanisms that make up the internal structure of the system.

DAI stablecoin token

DAI stable coin price tends to be stable at $1.00, the 24-hour daily volume is currently at $426,430.626.

DAI tokens minted by users using the Maker protocol. This differs from Bitcoin and its ilk to issue new tokens through a mining process. DAI governance is initiated by Maker DAO, which publishes according to Tether-like policies.

This DAI token does not have a maximum supply like Bitcoin, but the current total supply has reached 5,680,560,346 DAI.

DAI is very popular in the Defi project, according to a Yahoo Finance report there are more than 400 Apps integrated with DAI. The current market capitalization has reached 5 billion USD.

Is DAI stablecoin safe?

The DAI is technically relatively unknown and it is still a risk, but experts still believe that the DAI value will stabilize in the long term at $1.

The reason is that it uses ETH as collateral, which tends to have a stable value. As far as ETH has value, DAI will likely be safe. Unless there is an event that causes the price to drop, such as the black swan event.

In the process, DAI uses smart contracts, if there is a bug in the system, this may disrupt the transaction process in the DAI environment as it should be.

DAI stablecoin reserves

In general, stablecoins are backed by fiat money or maybe gold, but it is different from DAI.

DAI reserves use cryptos like Ethereum to maintain their value. To maintain that value rely on incentives and smart contracts.

If DAI drops at a certain price, the system attracts users to close their CDP. Or in other words, pay back their debt. In this way, the supply of DAI is reduced, as the amount of DAI that is repaid is burned.

If the conditions are reversed, where the price exceeds one dollar, then the system will give the user an incentive to open a CDP as interest rates are lowered. This creates a new DAI and increases the total supply. DAI use case.

Who is the founder of DAI?

Talking about DAI, inseparable from Maker DAO, this organization is developing the DAI token which is unique from other stablecoins. And speaking of Maker DAO will bring us to one Rune Christensen name. He is the founder of Maker DAO.

Before diving into the crypto world, Rune Christensen was an English teacher recruiter in China. He also studied at the University of Copenhagen and Copenhagen Business School. Until finally launching Maker DAO in 2015.

MakerDAO is a decentralized credit service provider organization that runs on the Ethereum blockchain platform.

History

Christensen’s journey to building Maker DAO was a tough one for 2020. At that time Maker had to suffer heavy losses after the market crash in March.

The loss was triggered by a drastic drop in the price of Ether. It is the main asset as collateral for Maker’s Dai stablecoin, costing millions of dollars. worth of liquidation.

Next Maker tries to conduct an auction for recapitalization. April, the Maker Foundation giving full control of MakerDAO and the Maker community over the next few years.

But as the Defi project heated up, Maker quickly recovered from its losses in March and made history in July as the first Defi protocol to hit $1 billion in total lock-in value.

Furthermore, in 2021 the growth of DAO makers is getting ahead. Total Value Locked at the start of the year rose to an all-time high.

DAI stablecoin white paper

The whitepaper is very essential because it can support the campaign to get success.

White Paper is a document that contains an explanation of a problem that a project wants to solve, a solution to that problem, as well as a detailed explanation of the project, its creation, and its interaction with users.

Here is the link DAI whitepaper.

What is DAI used for?

Blog Makerdao describes a stablecoin DAI use case that many developers have adopted. According to the report, there are 10 top uses case and benefits of DAI stablecoin, here is the list:

1. Complete Financial Independence, open to anyone, different from traditional banks which are full of requirements.
2. Self-Sovereign Money Generation, user can lock any amount of crypto in Maker Vaults and get DAI according to the collateral amount.
3. Savings, users can withdraw at any time and get DAI Savings Rate.
4. Stable Amid Volatility, this is because the DAI is pegged soft to the US Dollar and backed by collateral surplus locked in Maker Vaults.
5. Convenient, Fast, Cheap Remittance, available for cheaper cross-border payments as a stable medium of exchange.
6. Anytime Service, because it is decentralized, the service is 24/7. In contrast to banks that are tied to working hours.
7. For the convenience of use, Dai is easily exchanged for fiat currency via a wide variety of exchange platforms including Coinbase and its trading platform Coinbase Pro.
8. Transparency Above and Beyond Traditional, transactions recorded in the general ledger are easily traceable to anyone and from anywhere.
9. Ecosystem Driver and Defi Builder, many projects integrate DAI.
10. Other Blockchain-Based Advantages, many niche categories using DAI like blockchain-based gamers are developing.

DAI stablecoin ERC-20

DAI includes Ethereum token ERC20, this means DIA can be traded with all ERC-20 based tokens. Anyone using an Ethereum wallet can transfer, receive and own DAI.

The DAI holder is not worried about cryptocurrency price fluctuations, even if he holds DAI for two days or two months, the DAI value will be $1. For example, the current price you buy a loaf of bread for $10, will remain the same even though the crypto value has ups and downs.

How to know DAI was created is very complex and complicated. First ETH will be wrapped into WETH. Furthermore, WETH turned in Pooled ETH to become PETH. It is included in the large Ethereum pool that DAI is collateral for.

Then once you have a PETH, you can create a collateralized debt position” (CDP), which then locks the PETH and allows you to withdraw DAI.

DAI stablecoin transaction fee

DAI refers to Maker DAO using a stability fee, which means the fee is stable, say a person has 100 DAI in the first year he has 102, and in the second year has 104.

That’s because the stability fee is continuously compounding interest with a certain calculation. Read more for the rates module.

Since DAI is an ERC-20 token, the transfer fee uses gas, as does the ETH transaction fee. To calculate the cost of gas, you can go to https://ethgasstation.info/calculatorTxV.php.

How to buy DAI stablecoin?

How to buy DAI is to find an exchange that supports DAI. Besides that, you also need an Ethereum based wallet to store your DAI.

Here are some popular exchanges that support DAI:

• Coinbase Pro.
• Binance.
• Okex.
• HitBTC.

DAI stablecoin price prediction

Although stablecoin DAI is pegged at $1, several popular forecasting sites also predict the future DAI. Here’s the summary:

• Gov Capital predicts DAI in the next one year or in 2022 has the potential to increase by $1.669839 (66.984% ).
• Wallet Investor predicts DAI price to fall at $0.992 next year or 2022.
• FXleaders predicts DAI next year 2022 to be around $1.0047 – $1.0189, and three years from 2024 to be around $1.0047 – $1.03500.
• Tradingbeast predicts DAI at the end of 2021 at $1.2873986. and by year-end 2022 at an average price of $1.2963732. Prediction of year-end 2023 average $1.3205255 and year-end 2024 at $1.3648421.

Final Thought

DAI is a stablecoin that provides many benefits to the Defi project, the total value locked as the growth of the Defi project affects the increase in DAI.

DAI is a unique stable coin compared to other stablecoins backed by fiat money. Because DAI is decentralized, it is suspected that DAI security is not easy to hack. And it entrusts security to the blockchain.

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