Dai

Dai (DAI) is a decentralized stablecoin designed to hold a soft peg to the US dollar. Unlike fiat-backed stablecoins issued by a single company, Dai is created by users of the Maker Protocol, an open-source system of smart contracts on Ethereum. It has long served as one of the core building blocks of decentralized finance (DeFi), used for lending, borrowing, trading, and savings across many protocols.

Dai originated with MakerDAO, one of the earliest projects on Ethereum. The original single-collateral version (backed only by ether) launched in 2017, and in November 2019 the protocol upgraded to Multi-Collateral Dai (MCD), which allows a range of approved assets to back the stablecoin. Governance of the system is carried out by holders of the MKR token, who vote on collateral types, fee parameters, and risk settings. The Maker ecosystem has since rebranded as Sky, which also issues the newer USDS stablecoin, while Dai continues to circulate.

How Dai stays near one dollar

Dai is minted when users lock collateral — such as ETH or other approved assets, including some real-world and fiat-backed collateral — into vaults and draw Dai against it. Positions must remain overcollateralized: the value of locked assets must exceed the value of Dai drawn. If collateral falls too far, the position can be liquidated to keep the system solvent. Stability fees and savings-rate mechanisms adjust incentives to nudge Dai's market price back toward one dollar.

Because Dai is created and destroyed as users open and close vault positions, it has no fixed maximum supply — circulation expands and contracts with demand. Within the broader crypto ecosystem, Dai's main role is providing a dollar-stable unit of account that does not depend on a single custodian, making it a widely integrated settlement and collateral asset across Ethereum-based DeFi.