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Ethereum’s Price Gives the Dai Stablecoin Stability

nulltx

8mon ago

Stablecoins have taken over a significant portion of the cryptocurrency landscape. The team behind Dai is looking to shake things up significantly, with a rather unexpected approach.

Dai has quickly become a popular stablecoin, primarily due to some investment platforms offering very high interest rates.

Although this currency is pegged to one US Dollar, the team always wanted to try its hand at doing things very differently.

As such, the value of Dai will be closely linked to the Ethereum price.

That is a remarkable, albeit rather risky concept, given how volatile crypto markets tend to be on a daily basis.

According to the Dai team, this change makes perfect sense for all parties involved.

By utilizing smart contracts on the blockchain, they will be able to maintain a stable value for this stablecoin regardless of what happens to Ethereum’s value.

There is a secondary purpose to this approach, as Dai would circumvent any regulatory concerns regarding its fiat currency holdings.

Users will be able to check up on the supply of Ethereum giving the stablecoin’s supply its current value.

Moreover, the smart contract will serve as a ‘locking mechanism” for the ETH coins its value is linked to.

The balancing mechanisms underpinning this ecosystem will need to ensure the value of one Dai never strays from $1 too much, however.

This move ushers in a new era of so-called decentralized stablecoins, which work very differently from Tether’s USDT and similar ventures.

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