From MakerDAO, This Stablecoin’s Value Is Pegged to the US Dollar — but It’s Backed by Crypto, Not Fiat
As one of the leading global cryptocurrency marketplaces, OKCoin is constantly evaluating new forms of digital currency to find tokens worthy of joining its curated list alongside classics like bitcoin, ethereum, litecoin, and more. After careful consideration, the company is making its first addition of 2020: Dai.
Created by MakerDAO and billed as “the world’s first unbiased currency,” Dai shares some commonalities with other stablecoins; namely that it’s pegged to the US dollar. In other words, one Dai equals approximately $1, and if its value strays too far from that dollar, mechanisms kick in to get it back on track. How? Blockchain-based smart contracts that are possible because Dai is backed by crypto, not fiat.
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In a departure from other stablecoins, Dai is decentralized and algorithmic. Here’s how it works: Users deposit other crypto assets into a collateralized debt position to create Dai. Though the rates may fluctuate, a larger amount of crypto is required to mint DAI, meaning that Dai is always over-collateralized. Meanwhile, the MakerDAO system ensures that the price of Dai remains on par with USD by algorithmically assessing supply and demand.
When Dai first launched a few years ago, it could only be collateralized with ethereum. However, the self-governed MakerDAO community recently voted to accept other assets as collateral, transitioning to what is now called Multi-Collateral Dai (MCD). Now Dai can also be collateralized with BAT, with the MakerDAO community also considering Augur (REP), DigixDAO (DGD), Golem (GNT), OmiseGo (OMG), and 0x (ZRX) as potential collateral types.
Because of its decentralized nature and the fact that it’s not backed by fiat, Dai can’t be shut down by any government, nor can it be controlled by a single person. It’s meant to be exchanged directly and freely by anyone with an Ethereum wallet. At OKCoin, we’re excited about the technological possibilities MakerDAO has created with this innovative stablecoin.
OKCoin will begin offering DAI/USD beginning February 24th.
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