What is Dai (DAI)?

Deep Dive

1. Decentralized Dollar Peg

DAI is engineered to be a stable digital dollar that operates without a central issuer. Users generate new DAI by depositing approved cryptocurrencies—like ETH, WBTC, or USDC—into smart contract vaults, a process requiring over-collateralization (typically more than 150% collateral value). This buffer protects the peg during market volatility. If the collateral value falls too low, automated liquidations occur to repay the debt, ensuring each DAI remains fully backed (CoinMarketCap).

2. Community-Governed Protocol

Unlike centralized stablecoins, DAI has no single controlling entity. It is governed by MakerDAO (which rebranded to Sky Protocol in late 2024), a DAO where stakeholders use governance tokens to vote on critical parameters like collateral types, stability fees, and the DAI Savings Rate. This decentralized governance model aims to ensure transparency, censorship resistance, and collective stewardship over the stablecoin's monetary policy.

Conclusion

DAI is fundamentally a community-operated financial primitive that provides a stable, on-chain dollar alternative through over-collateralization and decentralized governance. How will its role evolve as the broader Sky ecosystem continues to develop?