DAI Coin is known as a popular Stablecoin in the current Crypto market, due to its stability and clear development plan. However, what is DAI Coin, how is it used? How is it different from USDT and USDC? Should you buy DAI? To get the answer, follow the content of this article and the information below.
Contents
- 1 What is DAI Coin? Should You Buy the DAI Stablecoin?
- 1.1 What is DAI Coin?
- 1.2 How Does DAI Coin Work?
- 1.3 Who Created Dai Coin?
- 1.4 Basic Information About DAI Coin
- 1.5 How many DAI coins are there in total?
- 1.6 Distinguished Features of DAI Coin
- 1.7 Pros & Cons of DAI coin
- 1.8 Comparing DAI vs USDT vs USDC
- 1.9 Where to Store and Trade DAI Coin?
- 1.10 Should You Buy stablecoin DAI?
What is DAI Coin? Should You Buy the DAI Stablecoin?
What is DAI Coin?
DAI coin is a type of stablecoin, launched in January 2017 by Maker. If you don’t know what a stablecoin is, it’s a type of cryptocurrency designed to keep its value pegged to another currency. In the case of DAI, it is pegged to the USD, meaning 1 DAI is always equal to 1 USD.
How Does DAI Coin Work?
DAI coin is different from other stablecoins because it is decentralized. Instead of having an organization/institution backing the value of DAI with actual US dollars, like Tether (USDT) or USD Coin (USDC), DAI is backed by collateralized cryptocurrency debt, in this case, Ether. This is important because it means that, like other cryptocurrencies, DAI can never be shut down and doesn’t need to rely on any intermediary institution.
This is extremely important. Because:
Some other stablecoins, notably Tether, have been mired in controversy about the management of their company Bitfinex, alleging they don’t have enough USD necessary to back USDT.
Therefore, the lack of management organization makes DAI coin safer. DAI is not vulnerable. There is no way Maker can steal your money, no way for a government organization to tax your money, and no one can infringe on your right to hold DAI.
All of this is thanks to smart contracts on the Ethereum blockchain.
Who Created Dai Coin?
One of the distinctive features of DAI is that it was not created by any one person or a small group of co-founders. Instead, the software supporting it and the issuance of new tokens are regulated by MakerDAO and the Maker Protocol.
MakerDAO is a decentralized autonomous organization that uses smart contracts to create self-executing agreements on Ethereum’s blockchain.
MakerDAO is governed by holders of its governance token, Maker (MKR), functioning much like a joint-stock company. MKR owners can vote on important decisions related to the development of MakerDAO, the Maker Protocol, and DAI, with their voting rights corresponding to the number of Maker tokens they hold.
MakerDAO itself was initially established by a Danish entrepreneur Rune Christensen in 2015. Before starting work on the Maker ecosystem, Christensen studied biochemistry and international business in Copenhagen and founded the international recruitment firm Try China.
Basic Information About DAI Coin
DAI Coin plays an important role in the MakerDAO & DAI ecosystem. Users can use their assets as collateral to obtain a corresponding amount of DAI.
- Token code: DAI
- Blockchain: Ethereum
- Token type: Stable Token
- Standard: ERC-20
- Total maximum supply: None
- Pegged to USD: 1 DAI = 1 USD
How many DAI coins are there in total?
New DAI tokens are not produced through mining like Bitcoin (BTC) and Ethereum (ETH), nor are they minted in separate releases by a private company like Tether (USDT). Instead, new DAI can be created by any user through the use of the Maker Protocol.
The Maker Protocol, running on the Ethereum blockchain, is the software that manages the issuance of DAI. To maintain a soft peg to the US dollar, the Protocol ensures that every DAI token is collateralized by a suitable amount of another cryptocurrency. As part of this process, the Protocol allows any user to deposit their cryptocurrency into what is called a Vault — a smart contract on the Ethereum blockchain — as collateral and mint a corresponding amount of new DAI tokens.
In summary: There is no upper limit on the total supply of DAI — the supply is dynamic and depends on the amount of collateral assets stored in the Vault at any given time.
Distinguished Features of DAI Coin
Passive Income Generation
Holders of DAI Coin can certainly generate passive income from it by participating in the ‘DAI Savings Rate – DSR’ interest creation program. Your DAI Coins will be locked for a certain period and you’ll receive rewards after the token lock period ends.
Additionally, you can also earn extra profit by directly depositing your tokens into MakerDAO’s smart contracts. You can deposit any amount of DAI without a minimum requirement.
Decentralized Freedom
You can control your wallet, as well as transaction activities, without the intervention of any third-party intermediaries. This not only helps users save costs on incidental expenses but also ensures safety, high security, and reduces the risk of hacker intrusion. This is something that not all assets or Fiat currencies can do, thus DAI Coin always attracts the attention of numerous investors.
Safety
The ecosystem of DAI Coin is implemented with safety procedures, from periodic monitoring, checking integrated DAI wallets, two-factor authentication issues, security,… Not only that, but the development community members of MakerDAO also verify smart contracts on the Blockchain to ensure the liquidity in the market, and the viability of that network.
Flexible Application
Although DAI Coin is a stablecoin in terms of price, it is applied very flexibly. In addition to using idle tokens to generate interest, you can use DAI Coin to trade with other currencies, use DAI in integrated games, use DAI for long-term investment purposes,….
Comparing DAI vs USDT vs USDC
The biggest competitor of DAI is undoubtedly Tether and USDC. To help you distinguish the differences between them, let’s follow the summary table below:
Name | DAI | USDT | USDC |
Collateral Asset | Ethereum | Fiat-Backed | Fiat-Backed |
Audit Frequency | Always public | Not Often | Monthly |
Safety Level | |||
Managing Organization | Decentralized | Bitfinex | Circle, Ltd |
Market Capitalization | $5,347,058,586 | $87,751,045,436 | $24,462,449,286 |
Ranking Stablecoin | 3 | 1 | 2 |
Detailed Assessment |
Where to Store and Trade DAI Coin?
DAI Coin is an Ethereum ERC20 token, so you can store DAI in standard ERC20 wallets such as: MyEtherWallet, Atomic, Exodus, Jaxx, Mist, Metamask,…. Or hardware wallets like Ledger or Trezor are also suitable.
So, where to buy DAI Coin? Currently, there are many exchanges listing this coin and you can consider buying it on large, reputable exchanges to ensure safety like: Coinbase, Binance,…
Should You Buy stablecoin DAI?
As the information shared above, DAI Coin is a type of Stablecoin, a price-stabilized currency. It is not too affected by market fluctuations, so investing to profit from DAI Coin through price volatility is not a suitable choice. But if you are looking for a stablecoin alternative to USDT, BUSD, USDC… then DAI might be a consideration.
Can DAI coin develop in the long term?
In my evaluation, DAI will continue to develop, despite facing many challenges. According to developers, their goal is to make DAI stablecoin the first global currency.
However, to become the leading, mainstream reliable cryptocurrency, DAI stablecoin needs to attract millions of users, not just build a brand. The MakerDAO team also needs to engage in serious marketing and education activities to expand its reach.
The good news is that DAI has gained global recognition after being adopted in DeFi Projects. As more projects use it, attracting millions of users to its ecosystem will become easier.
With the knowledge about DAI stablecoin above, we hope you understand more about what is DAI coin, so that you can come up with the most effective investment strategy and plan. If you have any contributions or opinions, leave a comment below the article!