DAI is a decentralized stablecoin pegged to the US Dollar, issued by the MakerDAO protocol. Unlike USDT or USDC, DAI is not backed by dollars in a bank — it is created by users depositing crypto collateral (ETH, WBTC, USDC, and others) into MakerDAO smart contracts and borrowing DAI against it. When the loan is repaid, DAI is burned. The system maintains the peg through overcollateralization and automated liquidations.
| Stat | Value |
|---|---|
| Ticker | DAI |
| Price | $1.00 |
| Market Cap | $4.36B |
| 24h Change | -0.0% |
| Circulating Supply | 4.36B DAI |
| All-Time High | $1.22 |
| Contract (Ethereum) | 0x6b17...1d0f |
How DAI is Created
- User deposits collateral (e.g., ETH) into a MakerDAO Vault (formerly called CDP — Collateralized Debt Position)
- User borrows DAI up to a maximum collateralization ratio (e.g., 150% for ETH — $150 ETH to borrow $100 DAI)
- User receives DAI usable anywhere; the vault’s collateral is locked
- User pays a stability fee (interest rate set by MKR governance, currently called the Dai Savings Rate)
- To retrieve collateral, user repays the DAI loan + accrued stability fee → DAI is burned
The overcollateralization is the core stability mechanism: DAI is always backed by more value than it represents. If collateral falls in value, the vault is liquidated before the DAI becomes under-backed.
Peg Maintenance Mechanisms
Target Rate Feedback Mechanism: Stability fee adjustments (via MKR governance votes) incentivize borrowing (low rate = more DAI supply = less demand = price back to $1) or repayment (high rate = less DAI = less supply = price back to $1).
Dai Savings Rate (DSR): Any user can lock DAI in the DSR contract to earn yield (set by governance). Higher DSR increases demand for DAI, supporting the peg.
Liquidations: If collateral ratio falls below the liquidation threshold (e.g., 150%), keeper bots liquidate the vault — selling collateral to repay the DAI and restore system solvency.
Peg Stability Module (PSM): Allows 1:1 swaps between DAI and USDC (and other stablecoins) within limits, providing a hard price floor/ceiling.
Evolution of DAI
Single-Collateral DAI (SAI) — 2017:
Original DAI, backed only by ETH. Called “SAI” after multi-collateral was introduced. Deprecated in 2020.
Multi-Collateral DAI (MCD) — 2019:
Expanded collateral types beyond ETH. Added USDC, WBTC, and many others. More stable but increasingly reliant on centralized collateral.
Real World Assets (RWA) — 2022-present:
MakerDAO began accepting real world asset collateral — US Treasury bills, corporate bonds, private credit. A significant portion of DAI is now backed by off-chain assets, reducing decentralization in exchange for stability and yield.
Rebranding to USDS (2024):
MakerDAO rebranded to Sky Protocol; DAI is being migrated to a new “USDS” token with additional features. DAI continues operating.
DAI vs. Other Stablecoins
| DAI | USDC | USDT | LUSD | |
|---|---|---|---|---|
| Issuer | MakerDAO (DAO) | Circle | Tether | Liquity Protocol |
| Backing | Crypto + RWA | USD in bank | USD + other | ETH only |
| Censorship resistant | Partial (USDC collateral) | No | No | Yes |
| Minimum collateral | 150% (ETH) | N/A | N/A | 110% |
| Governance | MKR token | Centralized | Centralized | Immutable |
Role in DeFi History
DAI launched in December 2017 as the first decentralized stablecoin designed for DeFi composability. It was the native stablecoin of the “money legos” era — every major DeFi protocol (Compound, Aave, Uniswap) integrated DAI from their earliest deployments. DAI represented the promise that crypto could create its own dollar-equivalent without banks.
Social Media Sentiment
DAI has a devoted following among DeFi purists who value its decentralized origin. The gradual shift toward USDC and real-world asset collateral has been controversial — Rune Christensen’s (founder) contentious governance proposals including the Endgame Plan and SubDAOs sparked significant community conflict. r/MakerDAO and Ethereum governance circles follow every governance vote carefully. Critics argue DAI has become a “centralized stablecoin with extra steps” given its USDC backing.
Last updated: 2026-04
Related Terms
Sources
- Christensen, R. (2019). The Maker Protocol: MakerDAO’s Multi-Collateral Dai (MCD) System. MakerDAO Foundation.
- Klages-Mundt, A., Harz, D., Gudgeon, L., Liu, J., & Cousin, A. (2020). Stablecoins 2.0: Economic Foundations and Risk-based Models. CCS 2020.
- Sam MacPherson et al. (2022). MakerDAO Real World Asset Collateral Framework. MakerDAO Governance Portal.