What is DAI?
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🟢 The simple version
Plain English — no jargon. Start here.
DAI is a stablecoin — a cryptocurrency designed to always be worth about one US dollar — but run by code rather than a company.
Crypto that doesn't bounce around
Most crypto swings wildly in price. A stablecoin is the calm exception: it's designed to always equal about one US dollar, so people can park money or pay with it without worrying about the value changing. DAI is one of the best-known stablecoins.
What makes DAI different
Many stablecoins are run by a company that holds real dollars in a bank. DAI is different — it's created and managed by smart contracts (automatic code) rather than a single company, and it stays stable by being backed by a surplus of other crypto locked up as collateral. That makes it more "decentralised" and transparent, since anyone can check how it works.
What to keep in mind
Stablecoins are useful for saving and moving money within crypto without the rollercoaster. But "stable" isn't a cast-iron guarantee — these systems rely on their design holding up under stress. DAI has a strong track record, but no stablecoin is completely risk-free. In India, note that even using a stablecoin counts as a taxable crypto transaction.
🟡 A bit more detail
For when you want to go a little deeper.
DAI vs USDC vs USDT
USDC/USDT: centralised (company holds USD reserves, can freeze accounts). DAI: decentralised (smart contracts hold collateral, no company controls it). Trade-off: DAI's decentralisation comes with complexity and peg risk (if collateral crashes faster than liquidations can occur). MakerDAO expanded DAI's collateral to include US Treasury RWAs and USDC, increasing stability but reducing pure decentralisation.
🟣 The full technical picture
For the technically curious.
Key facts
- Peg: $1 USD (soft peg via collateral + liquidations)
- Collateral: ETH, WBTC, USDC, RWAs, and others
- DSR: DAI Savings Rate (interest for holders)
- Creator: MakerDAO (rebranded Sky Protocol 2024)