Glossary · D
DAI
A decentralised stablecoin issued by MakerDAO (now Sky), soft-pegged to the US dollar and backed by over-collateralised crypto assets deposited into Maker Vaults. Unlike USDC or USDT, DAI is not backed by any company's bank account — it maintains its peg through smart contract mechanisms.
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How DAI works in practice
DAI is a decentralised stablecoin minted as debt against collateral rather than issued against bank reserves. Over time its backing has broadened from purely crypto collateral to include tokenised real-world assets, which changed its risk profile considerably.
Worked example
Locking collateral in a vault mints DAI; repaying burns it. Supply expands and contracts with borrowing demand rather than with an issuer's decisions.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Decentralised is a spectrum. As centralised stablecoins and tokenised treasuries became a large part of the backing, DAI inherited some of the censorship and counterparty exposure it was designed to avoid. Check what currently backs it.
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DAI: common questions
- What is DAI?
- A decentralised stablecoin issued by MakerDAO (now Sky), soft-pegged to the US dollar and backed by over-collateralised crypto assets deposited into Maker Vaults. Unlike USDC or USDT, DAI is not backed by any company's bank account — it maintains its peg through smart contract mechanisms.
- How does DAI work in practice?
- DAI is a decentralised stablecoin minted as debt against collateral rather than issued against bank reserves. Over time its backing has broadened from purely crypto collateral to include tokenised real-world assets, which changed its risk profile considerably.
- Can you give an example of DAI?
- Locking collateral in a vault mints DAI; repaying burns it. Supply expands and contracts with borrowing demand rather than with an issuer's decisions.
- What do people get wrong about DAI?
- Decentralised is a spectrum. As centralised stablecoins and tokenised treasuries became a large part of the backing, DAI inherited some of the censorship and counterparty exposure it was designed to avoid. Check what currently backs it.