What is DAI? The question that has adorned the search engines with its presence lately, and DAI has been making the internet go round. Talking about DAI, it is termed as a stable coin but the main point of concern is why cryptocurrency despite being the famous one still not able to be a worldwide accepted currency. What is holding cryptocurrency to be accepted or adopted as a real-world currency?
Well, the fluctuations in the prices of cryptocurrency are immense, and eventually, it plagues everyday life transactions. Ostensibly, cryptocurrency could not remain constant, the graph is just like a ping-pong game, the prices move back and forth drastically and unpredictably.
But with DAI- A stable coin you don’t have to fear the volatility of the prices, they are secured and this coin is pegged to USD. It is unlike bitcoin which rises and falls unexpectedly, by the time you finish reading this article, the bitcoin prices might have been pulled back or pushed up!
Dig Deep Into the DAI Concept!
DAI concept is pretty much easy and straightforward, mentioned earlier DAI is commonly known as a stable coin, pegged to the value of another asset and will hold the same value with that asset through time.
Stable coins can be pegged to any asset, a real asset, other cryptocurrencies, or commodities. But mostly the stable coins are pegged to fiat currencies like USD, British Pound, Euros, etc. So when we say DAI is pegged to one US dollar, it means one unit of that crypto will always be equal to one US dollar.
Why DAI is Gaining the Popularity amongst the rest of the Major Cryptocurrencies?
The main reason for their popularity is the nature of being volatile, people don’t want to risk out their money. They want to be sure about their investment, and this is the main reason DAI has evolved in just a short time. In order to repay a Dai loan, you have to pay the interest plus the amount borrowed. You borrow 100 Dai from a CDP, and you subsequently deposit 2 ETH (worth $105 USD at the time of this writing). Your money then will be refunded after you have returned 100 Dai plus interest.
Besides bitcoin, you can borrow other stable coins, however, volatility on the market could end up costing you twice as much as your initial investment. If you deposit 10 AssetCoins and generate 100 Non-stable coins (NSCs) at a market price of $2 USD, then you borrow them for $2 USD. In that case, you will now owe 200 NSC plus interest, since NSC is now worth $1 USD.
What is Collateralized Debt Position (CDP)?
By offering a stable coin, MakerDAO offers a solution to the high volatility that cryptocurrency faces today. This is known as the Collateralized Debt Position (CDP). Those cryptos are stablecoins, which are dependant on a stable asset.
A currency exchange rate is pegged by fixing the exchange rate of one currency against another. The Dai stablecoin is pegged to the US dollar in this case. Known as stablecoins, they present a number of new financial opportunities not previously possible due to volatility. Dai’s platform is built on Ethereum and thus offers stability, transparency, as well as decentralization.
About DAO’s Full Decentralization
In achieving its goal of offering technology for borrowing and saving, as well as providing a stable cryptocurrency over Ethereum, MakerDAO has fully succeeded. Thus, the latest developments allow for full decentralization.
The Maker Foundation can expand to new sectors with the help of DAO, an Ethereum-based decentralized conglomerate of Blockchain gurus which is currently selling Nomics for $2,197 just a few days ago. To reach an agreement on the future of a protocol, they also rely on Ethereum’s functionality.
DAI stable coin is included in the Nemo economics token, which is used to make votes and stabilize Maker’s cryptocurrency holdings. A stable coin created by Maker can be used to borrow money at 0% interest. The protocol was designed to allow people with ETH and MetaMask wallets to do this.
Making use of MakerDAO’s stable currency and loans, anyone can borrow money and reliably estimate how much they will have to pay back. There is no longer any fear of cryptocurrency to cryptocurrency borrowing in the age of cryptocurrency. Now that the DAO has become fully decentralized, it has also officially taken that status.
The services it once provided aren’t any longer needed, even though it’s disappearing. A multi-billion-dollar protocol like Bitcoin requires developers, marketers, and even service providers to keep it running.
DAI is still the most famous stable coin in the cryptocurrency era, and it is said that people will start drifting their attention towards it. Despite being a stable coin, DAI can’t be accepted as a worldwide accepted currency.