DAI is a decentralized cryptocurrency known as a stablecoin, which aims to maintain a stable value relative to the US dollar. Created by the MakerDAO system, DAI is pegged 1:1 with the USD, meaning one DAI is intended to be equivalent in value to one US dollar. Unlike other stablecoins that are backed by USD in bank accounts, DAI is backed by collateral in the form of other cryptocurrencies deposited into smart-contract vaults on the Maker platform.
DAI maintains its peg through an autonomous system of smart contracts on the Ethereum blockchain, which dynamically manages the issuance and elimination of DAI in response to changes in market conditions. This system ensures that the value of DAI remains stable and minimizes volatility, making it a reliable medium of exchange and a store of value for users seeking to avoid the dramatic price swings associated with other cryptocurrencies.
