Learn more about DAI, an unbiased hybrid stablecoin

What is DAI crypto?

What is DAI backed by?

  • Basic Attention Token (BAT)
  • Compound (COMP)
  • TrueUSD (TUSD)
  • 0x (ZRX)
  • Decentraland (MANA)
  • Chainlink (LINK)
  • Gemini Dollar (GUSD)
  • Uniswap (UNI)

How does DAI work?

  • No one entity controls the minting and burning of DAI. New tokens are generated automatically once a borrower deposits collateral into a smart contract.
  • Despite the 1:1 USD peg, DAI maintains value by locking other digital assets in contracts instead of cash or cash equivalents. It relies on collateralized debt denominated in ETH and other cryptocurrencies.
Comparison of stablecoin supply. Source: The Block

Minting and burning of DAI coin

  • Users deposit other crypto to borrow DAI via the Oasis dashboard. These loans are always over-collateralized (the value of the collateral exceeds the loan amount), as the collateral includes volatile digital assets. Currently, Oasis Borrow supports 20+ assets.
  • A user’s request for a loan generates a smart contract — a vault. It holds the collateral in escrow until the borrowed amount is returned. Meanwhile, the user receives (mints) DAI. In previous protocol versions, vaults were called collateralized debt positions (CDPs).
  • Once a user repays a DAI loan, the system releases the collateral back to their wallet. Meanwhile, the returned DAI tokens are dissolved or burned.

Advantages of DAI crypto

  • No account minimum. The MakerDAO website describes DAI as “the world’s first unbiased currency” that “does not discriminate.” You can start from any amount you can afford.
  • Stable value. As a stablecoin, DAI not only provides a hedge against market shocks. It allows the unbanked to transfer funds and helps residents of economically unstable countries protect their holdings from inflation.
  • Freedom of decentralized finance.DAI holders have unrestricted access to their wealth, even in countries with limitations on bank withdrawals.
  • Passive income. Thanks to the DSR mechanism, users earn DAI interest by locking up their tokens. This system is not a proprietary staking scheme — it merely leverages Ethereum’s consensus. Holders deposit tokens into a MakerDAO smart contract, which allows withdrawal at any time and ensures secure investment.
  • Fast and cheap. Like other ERC-20 stablecoins, DAI supports faster and cheaper transactions compared to international wire transfers. Transactions between crypto wallets are more efficient and transparent. They are processed in minutes 24/7, on any day of the year, while conventional institutions only operate during business hours.
  • Security. MakerDAO has conducted extensive research and audits. All smart contracts and protocol mechanisms are verified through mathematical analysis.

Disadvantages of DAI coin

How safe is DAI?

  • If the DAI price rises too high, the supply is increased.
  • If the DAI price falls below the peg, the supply is decreased.
  • Instead of dealing with supply-side economics, MKR holders adjust DSR — DAI Savings Rate — to manage the demand for DAI.
  • MKR holders are guarantors for DAI: in turbulent periods, their tokens can serve as an additional liquidation source.
  • MKR holders receive an interest payment through the Oasis Dapp. This reward motivates them to support the smooth functioning of DAI.

How does DSR work?

DAI applications

DAI crypto price

DAI price chart. Source: CoinGecko

DAI on CoinLoan

DAI loans

DAI crypto interest

  • 10.3% DAI APY
  • 12.3% DAI APY with CLT Staking

Final word



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