DAI is the ‘steady hand’ in the roller-coaster world of crypto. It is a stablecoin, which means that its only job is to stay exactly at $1. Unlike assets like Bitcoin or Ethereum, which can change by thousands of dollars in a single day, DAI is meant to be boring.
It isn’t really an acronym. It comes from the Chinese character Dài, which means “to lend” or “to provide a loan”. This is a great way to describe its DNA, because this token isn’t created from thin air. It comes to life when someone locks up their other cryptocurrency (like Ethereum) as collateral to “borrow” DAI. But unlike most stablecoins like USDT or USDC, which are managed by private companies, DAI is decentralized and not controlled by any single entity. It’s managed by a software protocol called MakerDAO, built on the Ethereum blockchain.
It is primarily used in DeFi as a safe-haven. If you think the market is about to crash, you can park your funds in DAI to protect your value without having to move your money back into a traditional bank. It can also earn you interest if you put your DAI into high-yield protocols. These are often much higher than a local savings account. And since it’s just code, you can send $100 worth of DAI to someone across the ocean in minutes for a tiny fee, and then don’t have to worry about the price dropping by the time they receive it. Gamers even use it in blockchain games for in-game purchases.
Your completely free resource hub designed to boost your knowledge of cryptocurrencies