Cryptocurrencies evolved significantly over the past few years and have gained more presence among the masses. However, the volatility of prices is a challenge that remained constant. On a given day, cryptocurrency prices can fluctuate dramatically, though some may enjoy the possibility of speculation because of the massive fluctuations.
As compared to other cryptocurrencies, Dai is a decentralized cryptocurrency stabilized against US Dollar. Created through the Makers (MKR) Dai Stablecoin System, there is a margin trading used to respond to the changing market conditions and preserve its value against the world’s major currencies.
What is Dai?
Dai is a stablecoin aiming to be equal to the US dollar. Dai is unique in the way that it is entirely decentralized and uses smart contracts to maintain stability. It will always be around $1; therefore, it is perfect as a currency.
You should not be worried about spending your Dai to have it rise in value in the coming future. The main reason why Bitcoin is a good store of wealth is that people believe that it will increase in value, and many people spend it. On the other hand, you are free to spend Dai and use it as a currency.
How is Dai a stable coin?
There is at least $1 worth of crypto that is backing each Dai. Unlike the other stablecoins that rely on the company holding collateral, Dai handles all the processes using smart contracts. A single company does not control dai. Its user opens CDP (Collateral Debt Position) with Maker. ETH or any other crypto would be deposited into the CDP, and it depends on the ratio, they would be earning Dai in return.
By depositing Dai, the user would be able to claim back the ETH, and the ratio will determine the amount that the user would get back. This ratio helps to keep the price of Dai to $1. The user can buy Dai on any exchange as he knows that it will be close to $1 well into the future.
Advantages of Dai
- It is borderless
More than 1.8 billion people in the world don’t have access to a bank. This helps the people to hold a form of value without having a bank account. As Dai is decentralized, you can store it in a wallet, and no one can block it.
- Protection against any hyperinflation
Dai helps prevent hyperinflation, and is worth approximately $1, and will be worth the same in the future. It can be used to store value and protect against hyperinflation.
- It is programmable
As you have to pay many people every day, and you can do it by writing a simple script. As Dai is decentralized, you can send it any day of the week and at any time.
Dai can become one of the currencies of the future. As its value stays the same, therefore, it is perfect for spending. In the coming future, it may be used for international payments and money transfers, and it works very well with other cryptocurrencies. There could be a future where people would store their wealth in Bitcoin and other cryptos and transfer the wealth around the world; they would use Dai.