DAI is a decentralized cryptocurrency pegged to the US Dollar. Here’s a concise overview:
1. **Stability**: DAI is a stablecoin designed to maintain a value of 1 USD. It achieves this stability through an automated system of smart contracts on the Ethereum blockchain.
2. **Decentralization**: Unlike traditional stablecoins backed by fiat reserves held in centralized entities, DAI is managed by the MakerDAO community, making it decentralized.
3. **Collateralization**: Users generate DAI by locking up cryptocurrency (e.g., Ethereum) as collateral in Maker Vaults. Over-collateralization ensures stability and risk mitigation.
4. **Use Cases**:
- Payments and remittances.
- Decentralized finance (DeFi) applications like lending and yield farming.
- Hedging against cryptocurrency volatility.
5. **Governance**: The MakerDAO community governs DAI, deciding on system parameters like collateral types and risk management policies through a voting system.
This structure makes DAI a unique tool for achieving stability in a decentralized ecosystem.
Credit: @BBODTV
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