What is DAI Stablecoin? Find Out Here
What is DAI Stablecoin? Find Out Here
After the crash of so called stable coin UST and dragging down with it it's native token called LUNA the markets have quickly been trying to find new places to store their value. Storing value in stable coins is a nessasrly evil and replaces what banks are in terms of investing in the stock market.
When markets turn bad people move their money into more stable projects like interest, bonds and these all hold a stable value. As markets heat up investors and people move out of these safe havens back into riskier stocks. It's the same thing we are now seeing in the crypto space and these so called stable coins are a way to do that.
What Is DAI
Dai formerly known as Sai is a stable coin cryptocurrency on Ethereum that aims to keep its value as close to the USD as possible. It does this through smart contracts and decentralized means. It was created in December of 2017 and the white paper for it can be found at https://makerdao.com/en/whitepaper/ It was originally founded in 2014 under the name of Marker DAO but it wasn't until December of 2017 that it got attached to smart contracts.
I think it's important to note a few key things about stable coins such as this. They attempt to do their best at holding that USD peg it doesn't mean they have to.
It uses a collateral system which allows someone with $150 worth of ETH to take out 100 Dai as a loan. This is what is considered a overcollateralized loan, the repayment of this "loan" over time is what creates the value and printing of the token. The removal of this value then destroys the DAI thus retaining it's core value of pegging it to the USD.
It's governed by others via a decentralized system of voting for MKR token holders.
It's also expanded it's ability to accept other tokens for this collateral system outside of Ethereum such as COMP, USDC and BAT.
Benefits Of DAI
Passive Income - Is always a bit one of mine. With DAI you can earn interest on your DAI via DSR (DAI Savings Rate) which is a locking period of the DAI token.
Decentralized - It's one of the best cases of having a decentralized system this is a huge benefit when it comes to the prying overpowering and aggressive eyes of governments.
It's important to understand that every system built on the blockchain is through code in which a human has coded. That means it's not perfect and things can happen much like we saw happen with UST and LUNA. There are always risks with any investment and being that crypto is not FDIC insured like a bank is for a certain value you run the very real risk of losing it all. Always do your own research and also diversify over many tokens/stablecoins so if one crashes like UST it's not your life savings like we are seeing horror stories come out.
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So many stables, how many will actually end up being stables? lol, the question is rhetorical
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😭🤣
We've always been down on the fact that HBD is a stable-ish coin.
But do you think in terms of algorithmic stablecoins, that this is (or at least will be) accepted as the norm?
I mean it's partly the security features in place to prevent a death spiral that allow it to slightly fluctuate.
Interesting one.
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I love that you use.. Stable-ish that's exactly how I think of HBD.
I think there is room in the market space for tight pegs, such as Tether, and also ISH stables, like HBD.
We have a lot of safety nets in place to not kill Hive in the process, but I wonder how HBD will hold up to the semipeg in an extended low price period.
One thing, is if it doesn't stay pegged, at least it doesn't take down Hive with it.
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The peg is due to the low float. There are few exchanges carrying it which makes it volatile. We have basically 9 million HBD in the free float.
So it will likely tighten as the numbers expand, both the number of places where you get it along with the number of tokens available.
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It is going to depend upon creating use cases. That is why the articles detailing the directions that we need to expand in.
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Lol
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Yay! 🤗
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Now this is another thing learned today. I never really understood how DAI works (and never attempted to dig up on it) but thanks to this and for explaining it in layman's terms :)
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Stablecoins are not as stable and risk-free as it seems. What could happen with a Stabecoin, UST is the best example. I also think if you hold Stablecoins, don't just have one Stablecoin. Diversify between fiat-based Stabecoins and algorithmic Stablecoins so that you don't lose it all if any unexpected thing happens.
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Hmm eye opening! I thought with the name "Stable" it's all fine and good but I guess we can't expect everything to be perfect with stable coins.
Hbd is one of the stable coins hive has, I could say you mean we shouldn't expect it to be perfect either as regards to it being stable
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So if everything is based on loans, what will happen when prices crash and the collateral becomes way less than what the loan is worth? At that point in time, a lot of people are in trouble and the costs of liquidating at those prices also mean it will translate into a loss. Either way, I still see this as an issue as the it's kind of focused all on that.
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What is the interest rate?
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It's important to clarify these things before throwing stones on every stablecoin... DAI can't be compared with UST in any way, as it's a much more decentralized and completely different setup...
Also, DAI had something that UST didn't have... TIME to slowly develop into a strong stablecoin!
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I think DAI is also used a lot on Fantom network.
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DAI is the one I chose to nvest it.
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