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I assume because it allows you to trade in and out from crypto positions to something that tracks fiat. This of course assumes that this coin can actually hold

I assume because it allows you to trade in and out from crypto positions to something that tracks fiat. This of course assumes that this coin can actually hold its value in the event of a market crash. I also assume it’s not backed by real dollars held in a bank but some kind of basket of other cryptoassets right?

RexetBlell 8y ago
No it is not backed by real dollars in a central location. It's a kind of a derivative. The way it works is very interesting. Recently Andreessen Horowitz and others invested 12M into the project.
mattnguyen 8y ago
It's currently backed by ETH but is moving towards multi-collateral assets. Today, they announced a partnership with Omisego [1], with one goal to allow OMG to be used as a type of collateral. There's also chatter about using DIGIX, which is another stablecoin pegged to the price of gold. The mechanism by which they maintain stability is quite fascinating. From the whitepaper [2]: > The Dai Target Price is used to determine the collateral-to-debt ratio of a CDP, and thus the Target Price represents the price at which Dai is backed by collateral in the long term. The Target Price is continuously adjusted according to the current Target Rate. Automatic Target Rate adjustments ensure that the Dai market price remains stabilized around the Target Price in the short term. > When the market price of Dai is below the Target Price, the Target Rate increases. This causes the Target Price to increase at a higher rate, causing generation of Dai to become more expensive. This leads to CDP users covering their CDPs and leaving the ecosystem, causing the outstanding supply of Dai to decrease. At the same time, the increased Target Rate causes the capital gains from holding Dai to increase, leading to a corresponding increase in Dai demand. This combination of reduced supply and increased demand causes the Dai market price to increase, pushing it up towards the Target Price. [1] https://medium.com/makerdao/makerdao-and-omisego-announcing-dai-and-omg-collaborations-23600a080046 https://medium.com/makerdao/makerdao-and-omisego-announcing-... [2] https://github.com/makerdao/docs/blob/master/Dai.md#target-price-target-rate-and-the-sensitivity-parameter https://github.com/makerdao/docs/blob/master/Dai.md#target-p...
- fiatjaf 8y ago
  How does the system gets information about its own price in relation to the US dollar?
  - mattnguyen 8y ago
    They have a an oracle smart contract that takes the median of a variety of whitelisted price feeds. https://developer.makerdao.com/feeds/ https://developer.makerdao.com/feeds/

RexetBlell 8y ago

No it is not backed by real dollars in a central location. It's a kind of a derivative. The way it works is very interesting. Recently Andreessen Horowitz and others invested 12M into the project.

mattnguyen 8y ago

It's currently backed by ETH but is moving towards multi-collateral assets. Today, they announced a partnership with Omisego [1], with one goal to allow OMG to be used as a type of collateral. There's also chatter about using DIGIX, which is another stablecoin pegged to the price of gold. The mechanism by which they maintain stability is quite fascinating. From the whitepaper [2]: > The Dai Target Price is used to determine the collateral-to-debt ratio of a CDP, and thus the Target Price represents the price at which Dai is backed by collateral in the long term. The Target Price is continuously adjusted according to the current Target Rate. Automatic Target Rate adjustments ensure that the Dai market price remains stabilized around the Target Price in the short term. > When the market price of Dai is below the Target Price, the Target Rate increases. This causes the Target Price to increase at a higher rate, causing generation of Dai to become more expensive. This leads to CDP users covering their CDPs and leaving the ecosystem, causing the outstanding supply of Dai to decrease. At the same time, the increased Target Rate causes the capital gains from holding Dai to increase, leading to a corresponding increase in Dai demand. This combination of reduced supply and increased demand causes the Dai market price to increase, pushing it up towards the Target Price. [1] https://medium.com/makerdao/makerdao-and-omisego-announcing-dai-and-omg-collaborations-23600a080046 https://medium.com/makerdao/makerdao-and-omisego-announcing-... [2] https://github.com/makerdao/docs/blob/master/Dai.md#target-price-target-rate-and-the-sensitivity-parameter https://github.com/makerdao/docs/blob/master/Dai.md#target-p...

fiatjaf 8y ago
How does the system gets information about its own price in relation to the US dollar?
- mattnguyen 8y ago
  They have a an oracle smart contract that takes the median of a variety of whitelisted price feeds. https://developer.makerdao.com/feeds/ https://developer.makerdao.com/feeds/