What is the decentralized stablecoin Dai?
Dai is a decentralized stablecoin that is pegged to the US dollar. It is not backed by any physical assets, but instead by a collateralized debt position (CDP) on the Maker Protocol. This means that users can mint Dai by depositing other cryptocurrencies, such as Ether, as collateral.
The price of Dai is maintained by a system of smart contracts that are designed to keep the supply and demand for Dai in balance. If the price of Dai falls below $1, users are incentivized to buy Dai and repay their CDPs, which increases the demand for Dai and pushes the price back up. Conversely, if the price of Dai rises above $1, users are incentivized to sell Dai, which decreases the demand for Dai and pushes the price back down.
Dai is a popular stablecoin among cryptocurrency users because it offers a way to store value without having to worry about the volatility of other cryptocurrencies. It is also used by many DeFi applications, such as lending and borrowing platforms.
Here are some of the key features of Dai:
- It is decentralized, meaning that it is not controlled by any central authority.
- It is collateralized, meaning that it is backed by other cryptocurrencies.
- It is pegged to the US dollar, meaning that its price is intended to remain stable at $1.
- It is used by many DeFi applications.
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