Dai (DAI)

What is DAI?

Dai is a stablecoin, meaning it is designed to maintain a stable value relative to a specific asset or currency, in this case, the US dollar. It is a critical component of the Maker ecosystem, an Ethereum-based decentralized finance (DeFi) platform that includes the Maker Protocol, a decentralized application (DApp) on the Ethereum blockchain, and the MakerDAO, a decentralized autonomous organization (DAO) that governs the Maker Protocol. MakerDAO comprises stakers of Maker's governance token, MKR, which works alongside Dai to facilitate various functions within the Maker ecosystem.

The Maker Protocol allows users to borrow Dai by posting collateral in the form of Ethereum-based tokens or Ether (ETH) into Maker Vaults, smart contracts on the Ethereum blockchain. The collateral is held in these vaults as security while the borrower receives Dai in return. To protect against fluctuations in the value of the collateral, borrowers must provide more value in the form of collateral than they receive in Dai, a process known as over-collateralization.

The goal of Dai is to maintain a stable value relative to the US dollar through various checks and balances within the Maker system, including liquidation levels. In addition to the Maker Protocol and MakerDAO, the Maker ecosystem also includes the Maker Foundation and the Dai Foundation, which work to support and promote the development of the Maker platform and its various components.

The price of Dai is closely tied to the US dollar, with a value of around $1 per 1 Dai. However, like any cryptocurrency, Dai can experience price fluctuations, although these tend to be relatively minor. Overall, the goal of Dai is to provide a stable and secure means of storing and exchanging value within the digital asset space.

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