One of the biggest loophole in cryptocurrency is their highly volatile nature. Where their value are not stable and need frequent prediction. This problem is solved by the so called stablecoin and DAI is one of the most popular stable coin ever exist.
What is stablecoin
Stablecoin is a cryptocurrency which are linked to the real world fiat currency and assets. Moreover stablecoin can be considered as a fiat currency. And it can also be tied to asset like gold and oil. Stablecoin maintain stability in crypto community which are pron to various changes. Because of it stable value they are useful for receiving payment, used as utility token, rent, salery etc.
This is in contrast to the volatility nature of popular crypto currency like BTC , ETH etc. It also offers investor a secure way to set into the crypto market without exposing to the volatility nature of crypto. Additionaly stablecoin with fiat backing provides investore with the opportunity to trade between crypto and crypto without a need to buy a cryptocurrency.
What is DAI stable coin
DIA was developed by Maker DAO team in 2017 on an Ethereum blockchain. And is one of the most popular and interesting stable coin ever exist. It is the only decentralised stable coin available. This stablecoin is not isued by any centralised authority and hence the project is not under the control of any organisation unlike other stablecoin. Above all unlike other stablecoin DAI uses Smart contract and doesnt used fiat currency.
The Good of DAI
The good new for DAI is that it is a decentralised stablecoin and hence no need to trust any entity regarding DAI coin. Its mechanism is backed by ethereum collateralisation .Hence it is a realible source of stability and can track the price movement. The populariy of DAI coin is because of this decentralisation feature. DIA is highly listed on every popular exchange like coinbase. It uses margin trading to respond to changing market conditions and preserve its value against the major world currencies.
Above all being an Ethereum base ERC20 token DAI can be easily send to any ERC20 wallet like Metamask and also million of DAI can be stored with certainty of it value. DAI doesnt require any central authority to issue, redeem or hold for uses. Neither it is backed by USD. Instead it is backed by decentralised crypto debt. Hence DIA cannot be shutdown unlike other cryptocurrency.
DAI worked under a mechanism where user can make money when its value increases beyond 1$. It is peged with USD where it value will always revolt around 1$ . The mechanism is simple the more the value of DAI the more tge incentive created or burned. When DAI is more then 1$ Ethereum users are able to create DAI juts in 1$ and sell it more then 1$. This a also a well formated plan to make DAI not to exceed above 1$. Hence it Because of this unique mechanism DAI has been listed in many popular exchange platform.
The Bad of DAI
Every crypto project comes hand in hand with various disadvantage . Since DAI is not a centralised coin it is not backed by any authority.Hence, converting DAI coin back to fiat curreny like other stablecoin is not an easy method. In order to convert it to fiat we have to follow the same manner as other crypto does. By going to an exchange , sell it and then withdraw it to fiat currency.
Moreover this coin is not a friendly coin for traders as there are not many DAI order book available. So inorder to buy a crypto using DAI users have to first convert DAI coin to any other popular coin like BTC, ETH etc with additional fee for the conversion. Which i think is pointless. On top of this there more exchange where DAI need to be listed in order to avail trading. Above all holding a crypto currency with less volatile nature is not worth making profit out of it on the other hand.
The ugly of DAI
Being a stable decentralised coin with less volatality comparing to other there is still some concern about how the DAI mechanism wilk work under the volatility nature of Ethereum . In 2019 DAI value was under 1$ and even bellow 0.95$ for a month. Making maker DAO to increase the stability fee by up to 11%. So far its been a succes. But despite this fee hike the DAI community is not sure wethere the value won' fluctuate again until a better and prominet solution has been implemented.Also on May 12 the parent company Maker DAO was shut down due to black thursday making it require to replace all the previously launched smart contract
wow such a good post . thank you for sharing this type of article . I can know about Dai coin. and also know about bad side and good side of dai .