About
Dai is a decentralized, overcollateralized stablecoin designed to maintain a soft peg to the US dollar (1 DAI ≈ 1 USD) while operating without reliance on a centralized issuer. It is created and managed through the Maker Protocol, a system of smart contracts deployed on the Ethereum blockchain, and governed by MakerDAO, a decentralized autonomous organization composed of MKR token holders. Dai was created to provide a stable, censorship-resistant digital currency that can be freely transferred, used in decentralized finance (DeFi), and integrated into blockchain applications without exposure to the volatility typical of cryptocurrencies like Bitcoin or Ether.
Unlike centralized stablecoins that rely on custodial bank reserves, Dai is backed by on-chain collateral locked into smart contracts known as Maker Vaults. Users generate Dai by depositing collateral assets such as ETH, liquid staking tokens, tokenized real-world assets, and other approved cryptocurrencies at ratios exceeding the value of the Dai issued. This overcollateralization protects the system from market volatility and ensures that Dai remains solvent even during sharp price movements. If a vault falls below required collateral levels, it is automatically liquidated to preserve system stability.
The stability of Dai is maintained through a combination of economic incentives, interest rates (stability fees), liquidation mechanisms, and decentralized governance. MKR token holders vote on risk parameters, collateral onboarding, system upgrades, and emergency actions, aligning governance decisions with the long-term health of the protocol. In extreme scenarios, MakerDAO includes an Emergency Shutdown mechanism designed to allow users to redeem collateral directly if the system becomes compromised.
Over time, Dai has become a foundational building block of the DeFi ecosystem. It is widely used for lending, borrowing, payments, yield strategies, derivatives, and as a unit of account across decentralized applications. Dai is also multi-chain, available on numerous Layer-2 networks and alternative blockchains through canonical bridges, while remaining natively issued on Ethereum. Its decentralized design, transparency, and composability have made Dai one of the most trusted and widely adopted stablecoins in the crypto economy.
