No.028
Dai DAI
The balance-keeper who holds steady at $1 using only code and votes
๐ญ A collateral lock in one hand, a scale in the other, a decentralized alchemist who keeps its own balance with no company backing it
๐ฌ โNo bank holds my dollars. I hold crypto instead, lock it up, and let the math decide how much of me exists. Most days I sit right at a dollar. Once in a while I lean.โ
- Dai is a 'stablecoin': it aims to stay worth about $1.
- USDT and USDC keep real dollars in a bank. Dai doesn't. Instead, you lock up crypto as collateral and code mints Dai for you.
- There's no fixed supply. Dai is created when people borrow and destroyed when they repay.
๐ The Story
Let's skip the fairy tale and just meet Dai plainly. It's a stablecoin, which means it's built to be worth roughly one US dollar at all times. Most stablecoins do that the simple way: a company holds real dollars in a bank and prints one coin per dollar. Dai picked a stranger route. There's no company and no bank vault. There's crypto, locked up as collateral, and code that watches the math.
The Danish entrepreneur Rune Christensen and the MakerDAO community shipped Dai on Ethereum on December 18, 2017. The name comes from a Chinese character meaning roughly "to lend," which fits how it works: you lock up something valuable, and Dai is borrowed into existence against it.
Here's the part beginners actually need. When you put up crypto as collateral, the system mints you less Dai than that collateral is worth. That gap is the safety cushion. If your collateral loses too much value, the code sells it off automatically before things go underwater. Pay your Dai back and it's burned. No supply cap and no fixed number. Dai grows and shrinks with how much people borrow.
It mostly holds the dollar, but "mostly" is the honest word. In March 2020, when markets cratered worldwide, Dai briefly climbed to about $1.11 instead of sitting at $1. It came back. That wobble is a useful reminder that Dai keeps its peg through rules and incentives, not a guarantee.
๐ Stats
๐งฉ How it works
Dai has no blockchain of its own. It's an ERC-20 token living on top of Ethereum, so it borrows Ethereum's strength to survive. The heart of it is one idea: 'overcollateralization'. When you lock crypto like Ethereum into a collateral vault, a smaller amount of Dai than that value gets minted into existence. If your collateral drops below the required level, the code automatically 'liquidates' it to protect the system, and when you repay your Dai, that much gets burned away. None of this is decided by a company, it's all code and MKR votes.
๐ Light & Shadow
- No company sits between you and your money. Dai runs on code and MKR votes, so it can't be frozen by a single firm's decision
- It parks near $1, which makes it a quiet place to sit when the rest of crypto is lurching around
- You don't have to take anyone's word for the reserves. The collateral and the rules are open code anyone can inspect (that's what 'transparent' means here)
- The collateral is itself crypto, so a fast crash in collateral prices can set off waves of automatic liquidations (in spring 2020 the peg slipped up to about $1.11)
- The whole thing leans on smart contracts. A bug in the code is a real risk, and you're trusting the math more than any safety net
- The mechanics are genuinely harder to follow than "a company holds dollars," which can feel intimidating at first
๐งฌ Evolution lineage
Dai isn't a hard fork of another coin's code, it's an ERC-20 token built on top of Ethereum. Its 'dollar-peg' siblings are USDT and USDC, but those are centralized, fiat-backed coins a company guarantees, while Dai is decentralized and crypto-backed, so they branch off differently. Dai's own evolution line runs from single-collateral (SAI) โ multi-collateral (MCD) โ and, after the Sky rebrand, the successor stablecoin USDS, while its partner token MKR governs the system.
Meet the chain it's built on, and its 'dollar-peg' sibling coins too.
๐งญ Meet other friends
โ FAQ
- What is Dai (DAI)?
- It's a 'stablecoin' that tries to stay worth one US dollar ($1). Unlike USDT and USDC, which a company backs with real dollars, Dai is a 'decentralized (crypto-collateralized)' stablecoin: users lock up crypto (mainly Ethereum) as collateral and a smart contract mints it automatically.
- Who created it?
- It was created by MakerDAO, an organization run by people who hold the MKR governance token and vote on decisions, a DAO. Its founder is Danish entrepreneur Rune Christensen, and Dai launched on the Ethereum mainnet on December 18, 2017.
- How does it stay at $1?
- It uses 'overcollateralization', you can only mint less Dai than the value of the collateral you lock up. If your collateral falls below the required level, it's automatically liquidated, and when you repay your Dai it gets burned. A stability fee, the Dai Savings Rate (DSR), and MKR governance all help hold the $1 peg.
- Is there a supply cap?
- No. Supply is 'elastic', it grows when people lock up collateral and mint, and shrinks when they repay and burn. Unlike Bitcoin's fixed 21 million or Dogecoin's endless inflation, Dai expands and contracts automatically with demand to keep 'one coin per dollar.'
โ ๏ธ Not investment advice. All figures are for information only (MOCK ยท 2026-06-04).