THE Ethereum based Dai Stablecoin is a collateral backed cryptocurrency whose value is stable relative to the US dollar.
“Stablecoin” is a term used to describe cryptocurrencies that maintain a set value.
Dai uses a complex Ethereum smart contract platform that stabilizes the value through a dynamic network of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and appropriately incentivized external actors.
Similar to Tether, each DAI sticks to roughly $1. This coin offers a stable medium of exchange, unlike highly volatile digital assets like Bitcoin and Ethereum which have seen rises of up to 300% in a month.
The utility of volatile cryptocurrencies is likened to a bartering system, in which value is relative and even speculative at times.
The ever-changing value of Ethereum’s native Ether token hinders its utility as a medium of exchange because it encourages users to invest or hold the currency instead of using it as a currency.
Dai aims to represent the US Dollar, which acts as a reserve for two-thirds of foreign exchanges, within the decentralized Ethereum ecosystem.
In doing so, the Dai coin will encourage comfortable decentralized trade. Dai provides stable denominations for token trades, which are incredibly important for a decentralized marketplace like AirSwap.