What Is DAI Crypto? How the DAI Stablecoin Holds Its Dollar Peg

Summary: DAI is a stablecoin designed to stay worth one US dollar. Unlike USDT or USDC, it is not issued by a company holding cash in a bank. It is created when users lock more crypto than they borrow in smart contracts, and code keeps the system solvent. Its issuer, MakerDAO, rebranded to Sky in 2024 and launched an upgraded stablecoin called USDS, but DAI still exists and is still widely used.

• DAI aims for a 1:1 value with the dollar and has mostly held it since 2017.
• It is backed by overcollateralized crypto loans and reserve assets, not a single bank account.
• MakerDAO is now Sky, and DAI can be upgraded 1:1 to USDS, though you don't have to.
• DAI runs on Ethereum and several other networks, and you can spend it on gift cards.

What Is DAI Crypto?

DAI is a token on Ethereum that tracks the US dollar. Like other stablecoins such as USDT and USDC, it gives crypto users a way to hold dollar value without leaving the blockchain. What makes DAI different is how it's made: no company prints it in exchange for dollars. It comes out of a set of smart contracts that anyone can use.

DAI first launched in 2017 and switched to its current multi-collateral design in 2019. Governance was in the hands of MKR token holders through MakerDAO, one of the earliest and largest projects in decentralized finance.

How the DAI Stablecoin Keeps Its $1 Peg

New DAI is created when someone opens a vault, deposits crypto such as ETH and borrows DAI against it. The rules require more collateral than the loan, so there is always a cushion.

• Overcollateralization: to borrow $100 of DAI you might need $150 or more in ETH, depending on the asset.
• Liquidation: if the collateral falls too far in value, the system sells it to repay the DAI before the loan goes underwater.
• Rates: a borrowing fee and a savings rate are adjusted to nudge supply and demand when DAI drifts above or below $1.
• Peg stability module: DAI can be swapped 1:1 with certain other stablecoins, which acts as a hard anchor on its price.

That last point is the main criticism. A large share of DAI's backing has come from USDC and tokenized real-world assets such as Treasury bills, which makes DAI less independent of traditional finance than its decentralized label suggests.

DAI vs USDT and USDC

USDT and USDC are issued by companies, Tether and Circle, which hold cash and short-term bonds in reserve and can freeze tokens if required. DAI has no single issuer to freeze it, and its reserves are visible on-chain. The trade-off is complexity: DAI depends on smart contracts, collateral prices and governance working correctly, and its supply is much smaller than USDT's or USDC's.

MakerDAO DAI Stablecoin, Sky and USDS

In 2024 MakerDAO rebranded to Sky. It launched USDS, an upgraded dollar stablecoin, and SKY, a new governance token replacing MKR. DAI holders can convert to USDS at a 1:1 rate and back again, but nothing forces the switch. DAI keeps working, keeps its listings and remains one of the most-used stablecoins in DeFi.

Most people holding DAI for payments or savings don't need to do anything. If you use the Sky savings features, those are built around USDS, so check what each app expects before moving funds.

How to Get and Use DAI Cryptocurrency

The easiest way to get DAI is to buy it on an exchange such as Coinbase or swap another token for it in a wallet app. You can also mint it yourself through a vault, though that is a loan with liquidation risk, not a simple purchase.

When you send DAI, check the network. The same token exists on Ethereum and on networks such as Arbitrum, Optimism and Polygon, and sending it on the wrong one can strand your funds.

Is DAI Safe?

DAI has a long track record and held its peg through several market crashes, though it briefly slipped during the 2023 USDC scare. The risks are smart contract bugs, a collapse in collateral value and governance decisions. Your own setup matters as much: keep wallet software updated, avoid signing transactions on unknown sites, and use a VPN such as Surfshark on shared networks.

When DAI Is the Right Stablecoin

DAI suits people who want dollar stability without relying on one company's bank account, and who are comfortable with how DeFi works. If you want the largest liquidity and simplest setup, USDT or USDC may fit better. Either way, a stablecoin is most useful when you actually move it.

DAI holds its value, which makes it handy for everyday purchases, so you can browse gift cards you can buy with DAI.