DAI (DAIJ): Decentralized Stable Coin
DAI Quick Stats
As the cryptocurrency market has matured, there has been a push to solving the volatility issue that hampers wider adoption of the technology. To help cryptocurrencies move past investments and into consumption the incentives to buy and hold must be resolved through this stabilization. The “stablecoin” was made to solve this. A few have been created which utilize Bitcoin technology, however, DAI was created on the Ethereum blockchain, the first stablecoin to do so. CoinPayments now provides and integrations so merchants can accept DAI payments in their businesses.
How Does the DAI Stablecoin Work?
The DAI stablecoin was created as an ERC20 token on the Ethereum blockchain and utilizes smart contracts to maintain its price. The smart contracts have automatic pricing mechanisms that work to bring the value back to par whether it falls or rises above the $1 USD target. As it is an ERC-20 token, it can be freely traded between any Ethereum based token or wallet.
DAI is decentralized as well. It is backed by a diversified collateral portfolio which is comprised of assets from the holders, who hold these assets in what are called Collateralized Debt Positions (CDPs). These assets are managed by the Maker Governance process which is a part of the DAI stablecoin system. According to the DAI team:
“CDPs hold collateral assets deposited by a user and permit this user to generate Dai, but generating Dai also accrues debt. This debt effectively locks the deposited collateral assets inside the CDP until it is later covered by paying back an equivalent amount of Dai, at which point the owner can again withdraw their collateral. Active CDPs are always collateralized in excess, meaning that the value of the collateral is higher than the value of the debt.”
This is different than many other stablecoins, which rely on reserves of USD in centralized bank accounts to support the value of their coins, and therefore the control of these coins ultimately is in the hands of someone else.
Why Choose DAI Stablecoin Coin?
If you want to use a stablecoin, but don’t like the idea of having a centralized group controlling your funds, then the DAI stablecoin may be a great alternative. Through the use of smart contracts, you can stabilize your cryptocurrency holdings using DAI without giving up control to someone else to do so. Through CoinPayments, you can start accepting DAI payments in your business today.
FURTHER INFORMATION ABOUT DAI
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