Dai (DAI) is a type of stablecoin backed not by fiat currency but by cryptocurrency collateral. It maintains its value close to the US Dollar without being directly tied to it. DAI's functionality is rooted in MakerDAO, a decentralized system that facilitates the creation and management of the cryptocurrency. Leveraging smart contracts on the Ethereum platform and other intricacies, MakerDAO ensures DAI's stability while avoiding a rigid tie to any conventional currency. How does it operate? Individuals can generate DAI by locking up their cryptocurrency in smart contracts, akin to a loan scenario where DAI plays the role of the borrower. Lenders receive DAI as collateral.
For those seeking a cryptocurrency striving to preserve price stability yet not tethered to traditional currencies, DAI might be an excellent choice. It finds utility in decentralized financial applications and is actively traded on various exchanges.
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