What is Dai (DAI)?
Dai (DAI) is a decentralized, dollar-pegged stablecoin minted by Ethereum smart contracts against crypto collateral rather than issued by a company.
Dai (DAI) works differently from USDC and USDT. Those stablecoins are issued by specific companies that hold dollars and reserve assets, while Dai is minted and redeemed by smart contracts (automated programs) on the blockchain following set rules.
Dai (DAI) first launched in December 2017 and was upgraded to multi-collateral Dai in November 2019, according to MakerDAO's official materials. Dai is widely regarded as one of the oldest decentralized stablecoins.
How does Dai (DAI) keep its $1 peg?
Dai (DAI) relies mainly on overcollateralization. A user deposits crypto such as Ethereum into a smart contract (a vault) and can mint only a smaller amount of Dai than the collateral is worth, so collateral always exceeds the Dai issued.
Dai (DAI) automatically liquidates a vault when its collateral value falls below a set threshold, covering the shortfall. The combination of ample collateral and automatic liquidation is how Dai holds its peg without a company behind it.
Dai (DAI) also has a module (the PSM) that swaps Dai one-to-one with stablecoins such as USDC, which helps arbitrage pull the market price back when it drifts from $1.
Who runs Dai (DAI)? How are MakerDAO and Sky related?
Dai (DAI) rules, such as collateral types, collateral ratios and fees, are set by votes of governance-token holders. For most of Dai's history, MKR holders and MakerDAO filled that role.
Dai (DAI) issuer MakerDAO rebranded to Sky in August 2024 and launched the new USDS stablecoin and SKY governance token in September 2024, according to Sky's official announcements. Per Sky's documentation, 1 MKR converts to 24,000 SKY and 1 Dai converts to 1 USDS.
Dai (DAI) has not been retired after the Sky transition and circulates alongside USDS. Some exchanges have, however, converted Dai balances to USDS or scaled back Dai support, so users should check notices from the services they use.
Is Dai (DAI) really decentralized?
Dai (DAI) is marketed as a dollar without a company, yet its collateral mix holds a paradox. To keep the peg steadier, Dai has added large amounts of real-world assets (RWA) such as US Treasuries, along with USDC, to its collateral and reserves.
Dai (DAI) gained stability and protocol revenue from these RWA and USDC holdings, but the move sparked debate over whether Dai ultimately depends on centralized issuers and traditional finance. Balancing stability against pure decentralization remains an open question for Dai.
What is the Dai (DAI) roadmap, and how does the move to Sky work?
Dai (DAI) development now centers on the Sky transition that MakerDAO laid out as its Endgame plan. Sky aims to improve scalability and usability through USDS and sub-ecosystems called Stars, such as Spark, while reworking reward and governance structures.
Dai (DAI) holders can swap Dai for USDS one-to-one through the converter in Sky's official app, and the reverse swap is also supported. Depositing USDS earns the Sky Savings Rate (SSR), which changes over time by governance decision.
Dai (DAI) is seeing new features and rewards concentrate on the USDS side after the Sky transition. Whether to keep using Dai or move to USDS usually depends on which services support each token and which features a user needs.
What are the risks of Dai (DAI)?
Dai (DAI) has a long operating record, but it is not risk-free. If the USDC or real-world assets in its collateral come under stress, Dai's peg can be affected, and in extreme market crashes large liquidations can strain the system.
Dai (DAI) may face disruption during the brand and token transition to Sky and USDS, including reduced exchange support or shifting liquidity. Possible technical flaws in the smart contracts and changing stablecoin regulations in different countries are also worth weighing.
Dai (DAI) is covered here for information only, and this article is not investment advice. Always make investment decisions at your own responsibility.
