The MakerDAO network has two native tokens: DAI and ADA. Other than MKR, which is a governance token like many other cryptos, the other is named MKR.
Changes to the network can be voted on by MKR owners. You have more sway in elections if you own more MKR. The MakerDAO token, MKR, is a kind of investment in the platform as a whole. You can lend MKR out if you have it. People borrow MKR and then spend the interest they earn on their loans to buy MKR, which they then burn. Due to scarcity created by token burning, MKR’s price should remain stable. It’s currently one of the top 25 most valuable cryptocurrencies in the world. The fact that you can buy it on numerous of the major cryptocurrency exchanges makes it even more accessible. Several facts concerning Dai should be taken into consideration before doing so.
Dai Is a Decentralised Stablecoin That Has No Central Authority
For cryptocurrencies, stablecoins can be thought of as tokens that are linked to a certain asset. Stablecoins like Dai, which is one of the most popular, are all pegged to the dollar. Dai’s main stablecoin rivals include the likes of the following:
- United States Dollar Coin (USDC) (USDC)
- The Binance USD is currently trading at (BUSD)
- Dai is a decentralised alternative to current stablecoins. Dai is maintained by MakerDAO, a decentralised autonomous organisation.
When compared to other stablecoins, Dai uses smart contracts, which are computer programmes that can run automatically when specific circumstances are satisfied, to maintain its price. It’s supported by various cryptocurrencies.
In addition to its unique backing, Dai stands out from other U.S. dollar stablecoins. In most cases, these stablecoins state that each coin is supported by a reserve of at least $1.
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Learn more about this company’s long-term potential by signing up for Stock Advisor today and accessing our special report. Get started right away with a great new member discount and find out more information. Other coins are used to support Dai. At the time of this writing, USD Coin (USDC) and Ethereum (ETH) are the two largest cryptocurrencies backing Dai. On the “What’s backing my DAI?” tab, you may view a complete breakdown.
Because not all of Dai’s reserves are secure, this is a possible concern. In March 2020, after Ethereum lost more than a third of its value in a single night, its position was particularly perilous. Even an emergency shutdown of Dai was discussed by MakerDAO. Dai holders would have had to exchange their tokens for Ethereum if that had happened. With Dai intact, MakerDAO opted to include USD Coin in its reserve pool. That’s why so much of Dai is backed by USD Coin right now. Prices may change at any time.
Stablecoins whose value is tied to the US dollar is often misunderstood. It’s critical to keep in mind that things don’t operate quite like that.
Dai Can Be Lent Out or Used as a Kind of Insurance Against Market Volatility, Depending on Your Needs
Dai can be used in a variety of ways. One of the most prevalent is to use it as a safety net in case the crypto market has a slump. The more volatile cryptocurrencies, such as Bitcoin and Ethereum, might be traded for Dai before the values rise again.
You might want to think twice about it. Any profit you could have made from sticking with your original coins will be lost if your prediction of market direction is incorrect.
Staking Dai is another method of utilising it. The process of earning interest by lending out your cryptocurrency is known as staking. Through MakerDAO’s Oasis programme, Dai can be staked. Dai staking is also available on many cryptocurrency exchanges.
Dai Is a Good Option for Sending Money Across Borders
Because of its low value, Dai is an excellent cryptocurrency for sending money. If you send someone $100 worth of Bitcoin, the money they receive may be worth $95, $105, or something else entirely. Even if you send Dai worth $100, you may expect that it will still be worth $100 when you receive it.
To transfer funds across crypto exchanges, the same applies. Due to Dai’s stable value and the fact that it is supported by numerous exchanges, it makes sense for this purpose.
This project, Dai, is an excellent illustration of the power of smart contracts in action. Even though there have been occasional hiccups, a stable coin that is not controlled by a single entity is an outstanding achievement.
The Question Is Whether or Not I Should Invest in Dai
What’s the Point of Dai?
DAI is a great instrument for avoiding the volatility of the cryptocurrency markets because it is tied to the value of the U.S. dollar. If the price of cryptocurrencies suddenly plummets, shifting your money to DAI could decrease your exposure.
The Price of Dai During the Past Few Years
DAI is a stable coin that is based on the US dollar (see the dai coin price chart above). If it is worth $1 (or $0.75), then it should always be worth $1.
Looking at the price history of DAI, we can see that it has had a lot of popularity. Taking the 13 March 2020 high as an example, and the 19 February 2020 low as an example, the difference between the two is a little over 14 cents. This is an extremely narrow price range when compared to other, less stable cryptocurrencies.
Before making any kind of crypto investment, you need to ask yourself this fundamental question. To assist you in making an investment decision, let us have a look at the DAI growth prediction.
Because DAI is pegged to the US dollar, your transactions and investments are always safe when you use this reliable coin. This coin can also be used as a kind of collateral in other transactions. Because DAI is built on Ethereum, every transaction is guaranteed to be secure. This token can be used to purchase any Ethereum asset. You can use DAI tokens as collateral to continue using any decentralised app built on Ethereum technology.
Jonathan Herrod is a content writer who enjoys writing about technology, video games, and other topics. The author of informative articles that are well-researched and written with attention to detail has been writing professionally for nearly three years and specializes in the creation of well-researched and written attention to detail articles.