What is Dai (DAI)?

Deep Dive

1. Purpose and use

A stablecoin is a cryptocurrency designed to keep a relatively steady value against another asset, commonly the U.S. dollar. DAI’s goal is to let people hold and use dollar linked value on Ethereum without relying solely on a conventional bank account or a single company issuing tokens.

It can be used for sending value and within decentralized finance (DeFi) services, such as lending and trading. CoinMarketCap’s DAI overview describes it as a stablecoin managed by the Maker Protocol, now part of the Sky ecosystem.

2. How it works

DAI is an ERC‑20 token, a token standard on Ethereum. Users can generate it by locking approved assets in smart contract vaults. The protocol requires collateral value to exceed the DAI issued; if collateral falls below required limits, it can be liquidated to cover the obligation. This overcollateralization is intended to help support DAI’s dollar target, but it does not guarantee the price will always match exactly.

Protocol parameters and development are governed through the Sky ecosystem. CoinMarketCap identifies MakerDAO as the decentralized organization behind the protocol’s development and issuance.

Conclusion

DAI is a dollar oriented digital token whose value model combines Ethereum smart contracts, collateral and decentralized governance. How will the Sky ecosystem develop DAI’s role as a usable stablecoin across DeFi?