3 ms·
As I understand, Dai is an overcollaterized stablecoin. People mint Dai by locking up cryptocurrency into its smart contracts worth more than the Dai they get.
by zucker42 4y ago
As I understand, Dai is an overcollaterized stablecoin. People mint Dai by locking up cryptocurrency into its smart contracts worth more than the Dai they get. I believe that collateral can be automatically liquidated in the case of a crash of those assets. This is different from an "algorithmic stablecoin" as the term is commonly used, since by that people usually mean a coin which doesn't utilize collateral.
- skybrian 4y agoThe question is why is one cryptocoin "collateral" and the other "not collateral?" What's preventing whatever coins DAI depends on from a death spiral?
- charcircuit 4y agoIn my opinion the difference is that value of the collateral is mostly independent from the value of DAI. DAI going below $1 doesn't cause the price of USDC or ETH to go down.