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Tuesday, April 23, 2024

DAI: A Systematically Sustainable Stablecoin

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Developed by  MakerDAO, DAI is an algorithmic stablecoin based on the Ethereum blockchain. It’s pegged one-to-one with the US dollar and aims to provide investors with stability that other cryptocurrencies do not offer.

While cryptocurrencies are prevalent, the one thing that keeps some investors away from them is high volatility. Having said that, that same high volatility attracts others as the promise of fortune is too great.

For those who want to earn money without risks, stablecoins offer just that. While they are mainly used to make online purchases, they can also be lent out and bring a lot of passive income for borrowers.

Since DAI is one of the best stable coins out there and a solid option for passive income, it’s well worth exploring it.

What attracts investors 

With other stable coins, there might be an account minimum; however, DAI coin enables all investors to enter the market as they see fit and invest as much or as little as they want.

In addition, DAI provides a constant stable value as it’s pegged one-to-one with the dollar. As a result, DAI might even offer specific economic stability for investors in undeveloped countries.

Last but not least, DAI stablecoin might be the real solution to international wire transfers as it offers users nominal fees and lightning-fast transactions. And, a big plus is that you can transfer funds whenever you like. Banks only operate within regular work hours, while transactions with DAI—and other stablecoins—can be completed anytime.

Advantages of holders

As mentioned previously, this coin is pegged one-to-one with the US dollar and offers investors stability. But that’s not the only feature DAI’s development team can boast about. For instance, MakerDAO works hard to deliver state-of-the-art security measures to ensure that holders’ funds are safe.

Still, despite being extremely safe, if you plan to invest, you should always conduct thorough research, pinpoint the potential risk, and see whether the development team has the answers for them.

Speaking of advantages, while making a purchase online is made extremely easy, holders can put their money to work while enjoying a glass of wine in front of the TV. Furthermore, the MakerDAO system allows users to earn substantial interest rates on deposited assets in a MakerDAO smart contract.

In addition, the DAI coin is available on centralized and decentralized exchanges, making it easy for investors to find all the resources needed for a suitable investment. The APY your lending efforts will generate will ultimately depend on your preferred exchange.

How DAI tokens work

Lending and borrowing are made possible by depositing Ethereum-based assets in your Maker collateral vault. When users borrow DAI against locked collateral, a token is created. It is then destroyed once the borrowed sum has been repaid.

When you deposit Ether, you will also create DAI; when you pay off your DAI loan, you will receive your locked collateral. DAI uses this locked collateral in the Maker protocol smart contracts to maintain the same value as the U.S. dollar. If the value of the collateral falls below the value of the issued tokens, the collateral will be liquidated.

Once in your possession/borrowed, you can use DAI on DeFi applications or blockchain-based games, to name a few.

Storing DAO 

As with other digital coins, you will need a wallet to store your assets. The best option for DAI is MyEtherWallet, which supports many ERC-20 tokens. Be advised that this wallet only supports Ethereum and other ERC-20 tokens. You will need a different wallet if you want to hold other assets.

The good thing about MyEtherWallet is that it’s completely safe and users can enjoy their funds knowing they will never be a victim of hacking or other malicious activities. And lastly, users can exchange DAI within the app itself, adding convenience to the whole process.

Bottom line

Stablecoins are fantastic investment options for risk-averse investors as they do not have the volatility of cryptocurrencies such as Bitcoin. Having said that, even without the risk of volatility, investing in such a new trend of digital coins might be scary for some. 

For that reason, you should do your research and go over the coin’s whitepaper. DAI is the perfect coin for you if you are interested in lending and earning solid interest rates.


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