DAI was launched into the cryptocurrency market as a unique and valuable token, becoming one of the first decentralized stablecoins to be launched on the Maker protocol. DAI is a cryptocurrency asset that is different from other currencies in the crypto market. Unlike asset-backed currencies that companies use to generate profits, DAI always strives to maintain a 1:1 ratio to the US dollar and other stablecoins. That is, when converting DAI or USDT to BNB, significant discrepancies in amounts are a rare exception.
How the coin works
A secured loan is a way in which a lender uses its assets to secure a loan. If the borrower is unable to repay his debt, the lender may seize and sell the assets. Interest rates on such loans are significantly lower than on traditional unsecured loans.
The Maker protocol allows borrowers to lock up crypto assets like ETH and secure them using smart contracts running on the Ethereum blockchain. These assets are used to create new DAI tokens.
If the borrower wants to return the blocked asset or ETH, he needs to pay a fee and return the tokens to the protocol. This model ensures that the DAI supply cannot be altered by either party. The fixed supply is supported by a complex system of smart contracts that react to market price changes for the respective assets in real time.
The DAI token is one of the two native tokens of the MakerDAO network, along with the MKR governance token. However, unlike classical cryptocurrencies, it is stable. Its value is related to the value of the US dollar. Ideally, the parity between the DAI and the dollar should remain unshakable, but the market makes its own adjustments and the price of the token also fluctuates a little. However, compared to other cryptocurrencies, its volatility is negligible.
It is a derivative of the Maker protocol, an open source decentralized application running on the Ethereum blockchain. DAI can maintain its value using collateralized debt denominated in ETH, its native currency, Ethereum.
All in all, DAI is an innovative project that has a solid foundation. Below we present some of the main features and benefits of this token.
The DAI ecosystem is highly secure with measures such as two-factor authentication, a secure integrated wallet, and regular checks that allow users to use the platform seamlessly.
DAI’s decentralized design allows investors to freely use their funds. Permission-free system transparency eliminates the need for approvals, third-party intermediaries, or credit checks.
Is DAI a good investment?
It will not be possible to significantly earn on the change in the exchange rate of stablecoins relative to the dollar. They are designed for other purposes and do a good job of storing and transferring value.
They are great for accumulating and diversifying capital. Moreover, DAI to MATIC exchange is possible at any time. In addition, as decentralized finance develops, proven methods of generating passive income are gradually being introduced into this area.
There is such a program in the MakerDAO network, it is called DAI Savings Rate or DSR. By joining it, the user can receive interest income for the use of idle coins. DAI holders can deposit their tokens directly into the smart contract and interest is automatically credited to their account. There are no minimum deposit requirements, but the return on large investments in absolute numbers will be higher.
Still, it is worth remembering that stablecoins, especially algorithmic ones, are also not without risks, like any other digital assets. Therefore, including them in an investment portfolio, it makes sense to play it safe and distribute funds among several stablecoins.