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If you have an adversarial mindset (which is absolutely healthy) and want to understand it well enough to not immediately come up with counterarguments whose on

If you have an adversarial mindset (which is absolutely healthy) and want to understand it well enough to not immediately come up with counterarguments whose only valid reply is "RTFM", yes, it takes at least 20 minutes. But regardless, I'll bite. DAI has a couple of intended use-cases. I will focus here on the "stable coin" asset, meaning you should be able to expect it's value to not go up or down over time. It is inherently debt. The main component of DAI is "CDPs", Collateralized Debt Positions. There is a smart contract on the ETH blockchain. Smart contracts are computer code on the blockchain that are "open trustless execution", meaning you can inspect the source code, verify that it matches the deployed bytecode, and be certain that any transaction follows the rules. In DAI, there is no entity that can even theoretically exit-scam you. The configuration parameters of this smart contract is set by votes by the holders of the MKR token. This token is traded on public markets and is the speculative token of the ecosystem. You can deposit assets into this smart contract. The current version of DAI only takes ETH, but the intention is that MKR holders will consider any significant asset representable on the ETH blockchain. This includes other stablecoins (think fiat-backed tokens), tokenized equity or government bonds (which have already been issued on the ETH blockchain), tokens backed by commodities like gold, etc. When you deposit assets into the smart contract, you get DAI in return, representing a loan backed by the deposited assets. How much DAI you get in return is determined by an oracle (meaning a smart contract providing data external to the blockchain). This oracle is aggregated from several other oracles, similarly public and approved by the MKR governance. In general, the system is over-collateralized at any point in time. There is an incentive and liquidation system around the whole things that goes a bit further to ensure that the price remains stable despite fluctuations - and so far the DAI/USD price has remained really close to 1 throughout the ETH/USD long bleed of 2018, including short periods of high volatility. There is some degree of risk involved of course, most notably including the oracle price feeds. There is a road map to both increase transparency and decrease the possibility of collusion between oracle providers. There is also the "emergency shutdown", which involves freezing and instant liquidation, but this comes at a big cost to the MKR holders who have to approve it. Despite having been running for several years and having dozens of people (I think over 100 now?) it is, of course, still to a large part an experiment that is still evolving. But so far it has been performing better than I thought. And there is no way you could call it a scam.

ppf 7y ago
So in short, a price feed from several crypto exchanges. Thanks!
- Acrobatic_Road 7y ago
  No, did you even read what he wrote? Price feeds are used in the system, but the whole system does not boil down to "price feeds". I am not even sure what that could mean.
  - ppf 7y ago
    I asked how is the Dai pegged to the dollar, and that is the answer.
    - Acrobatic_Road 7y ago
      Price feeds are the answer? The price feeds in question don't even track the price of Dai - so I am not even sure what mechanism you have thought up to explain to yourself how Maker works. If you are still having trouble understanding the system there is no shortage of resources available. Of course if you dismiss the resources because of an anti-cryptocurrency bias as you have then you will end up clueless since this is a realm with low-coverage in the mainstream.
      - ppf 7y ago
        I've read the previous, very long, answer. Yes, it explains how the Maker system works, but it does not explain which parts constitute the Dai to USD peg. The price feeds track the price of Eth, which is used to set the price of Dai if automatic settlement is needed (something I learned from the resources you describe!). If that doesn't set the price of Dai, then what does? Are you suggesting it's an emergent behavior of the system as a whole?
        Acrobatic_Road 7y ago
        When someone's ethereum CDP is liquidated onto the market it is auctioned off for Dai before the collateral no longer backs the Dai. The price feed determines when a CDP is in need of liquidation. This mechanism is important because it keeps the system overcollateralized. There is also something called global settlement. This is for major upgrades (they are doing one on the 16th) and also in case of emergencies. The price feeds in this case are used to determine Dai holder's proportional claims to the collateral (using the target price 1 Dai = 1 USD). It may happen happen Dai holders get less or more depending on the circumstance. In addition Maker is a major Ethereum application so if it failed the price of Ether would tumble. That is part of the reason they are expanding to support more collateral types in the update slated for the 16th. So every Dai is a rough promise for one dollar but that does not answer why Dai is stable day to day. It works like this: When the price of Dai falls under 1 dollar, CDP owners will buy it up and close their positions at a discount which will put upward pressure on the price. Likewise, if the price of Dai goes above one dollar then fresh CDPs will be opened and fresh Dai will be sold on to the market, putting downward pressure on the price. If that isn't enough, the interest rate is manually adjusted to fine-tune the supply. In the future part of the interest will be payed in to an optional savings account for Dai holders. The idea is that by adjusting the APR the demand for Dai can be fine-tuned. When rates are high people will buy Dai and lock in in a savings account. If demand is too high rates can be lowered causing an inverse affect. https://blog.makerdao.com/introduction-to-emergency-shutdown-in-multi-collateral-dai/ https://blog.makerdao.com/introduction-to-emergency-shutdown... I hope that helps.

ppf 7y ago

So in short, a price feed from several crypto exchanges. Thanks!

Acrobatic_Road 7y ago
No, did you even read what he wrote? Price feeds are used in the system, but the whole system does not boil down to "price feeds". I am not even sure what that could mean.
- ppf 7y ago
  I asked how is the Dai pegged to the dollar, and that is the answer.
  - Acrobatic_Road 7y ago
    Price feeds are the answer? The price feeds in question don't even track the price of Dai - so I am not even sure what mechanism you have thought up to explain to yourself how Maker works. If you are still having trouble understanding the system there is no shortage of resources available. Of course if you dismiss the resources because of an anti-cryptocurrency bias as you have then you will end up clueless since this is a realm with low-coverage in the mainstream.
    - ppf 7y ago
      I've read the previous, very long, answer. Yes, it explains how the Maker system works, but it does not explain which parts constitute the Dai to USD peg. The price feeds track the price of Eth, which is used to set the price of Dai if automatic settlement is needed (something I learned from the resources you describe!). If that doesn't set the price of Dai, then what does? Are you suggesting it's an emergent behavior of the system as a whole?
      - Acrobatic_Road 7y ago
        When someone's ethereum CDP is liquidated onto the market it is auctioned off for Dai before the collateral no longer backs the Dai. The price feed determines when a CDP is in need of liquidation. This mechanism is important because it keeps the system overcollateralized. There is also something called global settlement. This is for major upgrades (they are doing one on the 16th) and also in case of emergencies. The price feeds in this case are used to determine Dai holder's proportional claims to the collateral (using the target price 1 Dai = 1 USD). It may happen happen Dai holders get less or more depending on the circumstance. In addition Maker is a major Ethereum application so if it failed the price of Ether would tumble. That is part of the reason they are expanding to support more collateral types in the update slated for the 16th. So every Dai is a rough promise for one dollar but that does not answer why Dai is stable day to day. It works like this: When the price of Dai falls under 1 dollar, CDP owners will buy it up and close their positions at a discount which will put upward pressure on the price. Likewise, if the price of Dai goes above one dollar then fresh CDPs will be opened and fresh Dai will be sold on to the market, putting downward pressure on the price. If that isn't enough, the interest rate is manually adjusted to fine-tune the supply. In the future part of the interest will be payed in to an optional savings account for Dai holders. The idea is that by adjusting the APR the demand for Dai can be fine-tuned. When rates are high people will buy Dai and lock in in a savings account. If demand is too high rates can be lowered causing an inverse affect. https://blog.makerdao.com/introduction-to-emergency-shutdown-in-multi-collateral-dai/ https://blog.makerdao.com/introduction-to-emergency-shutdown... I hope that helps.