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What is DAI currency? | How does the DAI currency work?

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What is DAI currency

What is DAI currency

As long as there is heavy volatility in the cryptocurrency market, we cannot use them for everyday transactions. Maker has a solution to solve this problem and that is Die currency. In the following, we provide an overview of its ecosystem and explain what is Dai currency? Of course, more reviews are needed, but reading this article is enough to familiarize yourself with this digital currency.

The name of DAI digital currency (Single Collateral DAI)
Abbreviation of SAI
Current price is $1.29
The daily trading volume is $902
Total supply $6,660,106
Amount in circulation $6,660,106
Official website http://www.makerdao.com/
White paper https://makerdao.com/whitepaper/

Now imagine a special digital currency that gives you stable returns, has little risk and makes a lot of changes because the technology of these currencies changes the world. Also, people who use the rise and fall of prices and are traders in some way can also use this currency. At the same time, their initial capital remains safe and has no risk of being lost.

CDP, which stands for Collateralized Debt Position, is a concept in digital currencies and, of course, financial fields. This concept has been developed by the MakerDAO project since 2014, and its aim is to provide a solution for the high volatility of digital currencies. The solution is to offer a stablecoin called Dai (DAI). A stablecoin is a currency whose value is linked to another asset that has a fixed value.

Pegging means that the value of this stablecoin is equal to the value of that asset (usually another currency). For Dai, its value depends on the US dollar. With the emergence of stablecoins, a new opportunity has arisen that was not possible before due to volatility. Die currency is not only stable, but also transparent and decentralized because it is launched on the platform of the Ethereum network.

Now back to the explanation of CDP. There are many mechanisms that set the value of a die equal to US$1. Maker does this by using smart contract technology that resides in the Ethereum network. This technology keeps the die price stable with a dynamic feedback system called CDP. In addition, it is possible to do margin trading using Dai.

 How does the DAI currency work?

How does the DAI currency work?

What is CDP and how does it work?

As stated in the text above, CDP stands for Collateralized Debt Position and means secured debt position, a concept in digital currencies and of course financial fields.

Using CDP, a user can provide an asset as collateral to the network and receive a loan in return. When the asset is available to the network, the user can generate and own the equivalent of that currency.

You can do whatever you want with Dai like any other digital currency. You can trade with Dai, use it for payment or even look at it as savings. There are no restrictions on its use and you are free to use it like other digital currencies.

Since the value of Dai is determined based on US dollars, you only need to pay back the equivalent of what you borrowed. Of course, there is an interest rate that is normal in every loan. Let’s say you deposit 2 Ether (ETH) on the CDP platform (for example, assume the value of Ether is $105) and borrow 100 Dai. You have to pay back 100 Dai and some accumulated interest to get your 2 Ether back.
Advantages and disadvantages of Dai currency (DAI)

Digital currency has its own advantages and disadvantages. Among the disadvantages of this cryptocurrency, it can be mentioned that it will not work in the next 4-5 years. Of course, this is only a possibility because it is expected that Dai Network will lose money to the lender immediately after the full repayment of the loan. In fact, DAI is largely limited to loans.

However, DAI has made its place in the crypto world and is now very popular because its value is stable. One of the most important advantages of DAI is the trading advantage. This digital currency has minimal volatility because it is directly linked to the US dollar.

DAI tokens are burned after each full repayment of a loan granted to a borrower, giving lenders peace of mind that no third parties are involved in their activities. Borrower and lender can decide on their mutual interest rate on Die platform.
What is the future of Dai currency?

The price trend of Dai currency – photo from Coin Market Cap website
Applications of Dai digital currency (DAI)

Diy currency has many uses, some of the most important ones are mentioned below:
1. financial independence

To participate in the traditional financial system, banks and other financial services companies require you to fill out personal information, proof of credit, and even a minimum deposit amount. These requirements can be difficult to meet. Stablecoin Die gives everyone, regardless of economic status, access to financial services and provides unparalleled financial freedom.
2. generate money

Every day, people buy Dai in different exchanges to use it. But many others turn to the Maker protocol to generate the digital currency Die instead of buying it. This process is relatively simple. Users lock additional collateral in Maker Vaults and generate and receive Dai based on the amount of collateral they have locked.
3. A convenient way to save

Stablecoin holders can die

d Get a good savings rate by locking it into a special smart contract. There are no fees, no geographic restrictions, and no liquidity barriers. No minimum deposit is required to earn the savings rate, and all or any portion of Dai can be withdrawn at any time.
4. Stable in the midst of fluctuations

Stablecoin Die offers stability in the volatile world of digital currencies. Die is pegged to the US dollar and backed by excess collateral locked away in Maker Vaults. When the market is very volatile, Dai allows users to keep the value of their assets away from volatility.