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Cryptocurrencies like Bitcoin are known for their volatility, leading to the rise of stablecoins like DAI. Unlike centralized options such as Tether, DAI is created through decentralized collateralized debt positions. This article explores how DAI maintains its peg to the USD and how users can leverage it for trading.
- DAI is a decentralized stablecoin pegged to the USD, created by locking collateral (e.g., ETH, WBTC) in MakerDAO’s system.
- Overcollateralization is required to mint DAI, and if collateral value falls too much, it gets liquidated via auction.
- Users can leverage DAI for long positions—borrowing against collateral to amplify gains if the asset’s price rises.
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