2 ms·
The price is pegged to the dollar, not the quantity in circulation. My point is that if the price is over a dollar, you mint more of them to pull the price down
by thebean11 5y ago
The price is pegged to the dollar, not the quantity in circulation. My point is that if the price is over a dollar, you mint more of them to pull the price down.
To me, DAI going over USD just indicates supply not meeting demand.
- KirillPanov 5y ago> you mint more of them to pull the price down No, in order to pull the price down you need to mint more of them and sell those new DAI into the market. Doing this saddles the minter-seller with a long USD/ETH position: they have to lock up a bunch of collateral in order to mint new DAI, and if USD/ETH drops enough their collateral will be vaporized. If no sellers believe that USD/ETH is going to rise, none will be willing to take that risk. DAI doesn't work like Tether. DAI aren't really "quasi-dollars". They're margin loans owed by other people. To bring them into existence, you need to find somebody who wants a margin loan in order to go long.
- thebean11 5y agoWho is the mint seller, the minter or the one buying the minted coin? It wouldn't be any entity minting these new DAI, it would be the Maker smart contract giving out new DAI loans for collateral (ETH, WBTC, WhateverTokens). If DAI is trading at $2, and I believe it will hit the peg again in the future, I'm very highly incentivized to borrow it and sell it for $2, pulling the price down! I then pay back my loan with DAI I buy for $1.