I just learned about DAI in detail and found that it differs quite a bit from other stablecoins that people commonly use. So, what is DAI? Simply put, it is a token on Ethereum with a stable value of 1 USD, but its operation is quite unique.

Before DAI, stablecoins like Tether or USDC had to rely on trusting the company behind them to actually hold enough USD in the bank. But DAI is different — it is created through a system of automated smart contracts on MakerDAO. When someone borrows on this platform, DAI is generated. When they repay the loan, DAI is burned. This mechanism helps keep the price stable around 1 USD without anyone needing to trust a centralized company.

The beauty of DAI is that it functions like a building block that anyone can use. Since it is just an ERC20 token on Ethereum, no one has the authority to block your use of it. Developers can even integrate DAI into various decentralized applications, or create variants like xDAI for faster transfers on sidechains, or rDAI to earn interest.

But what is DAI really in practical use? It’s very useful when you want to avoid the price volatility of Bitcoin or Ethereum. Instead of worrying about market fluctuations, you can hold DAI to protect your assets. Additionally, because DAI is stable, it’s also an ideal asset for spending or making payments.

Getting DAI is quite straightforward. The most direct way is to borrow on MakerDAO’s Oasis platform, or you can trade DAI on various exchanges. An interesting fact is that since 2020, DAI has become very popular in the DeFi community. Many services now allow users to earn interest on their DAI deposits. Some automated applications even use the yield to buy more crypto assets.

Most importantly, DAI has maintained this stability for over three years with only minor fluctuations. That’s why DAI is not just an ordinary stablecoin; it’s a truly decentralized solution to price stability issues. No need to trust anyone — everything is controlled by automatic algorithms. That’s what makes DAI stand out among many other stablecoins on the market.