DAI is a stablecoin in the cryptocurrency space that is pegged to the value of the US Dollar. This means that 1 DAI is meant to always be equal to 1 USD, providing stability compared to other cryptocurrencies that can be highly volatile. DAI is created and managed through the MakerDAO platform, which is a decentralized autonomous organization built on the Ethereum blockchain.
The creation of DAI involves users locking up their Ethereum as collateral in a smart contract, which then generates DAI tokens for them to use. Users can also borrow DAI against their collateral, creating a system of decentralized finance within the MakerDAO ecosystem.
If the value of DAI falls below 1 USD, mechanisms are in place within MakerDAO to help increase the price back to its peg. This may involve adjusting interest rates or other parameters within the system. Conversely, if the price of DAI rises above 1 USD, users can redeem their DAI for the equivalent USD value.
Overall, DAI provides users with a stable alternative to other volatile cryptocurrencies, allowing for easier transactions and increased predictability in the crypto space.
