Dai is a stablecoin created by MakerDao. A stablecoin is a low volatility cryptocurrency that has its price or value pegged to a particular fiat currency. In this case, Dai is a cryptocurrency with its price stability pegged against the U.S. dollar.
Unlike the majority of other stablecoins on the market, Dai is decentralized. Dai is created through borrowing on the Maker Platform and similar to centralized stablecoins, Dai’s value is in direct correlation to the US Dollar with 1 DAI equalling $1 USD.
Whilst most other stablecoins utilize a middleman to ensure that their cryptocurrency is pegged to the US dollar, by holding real US dollars in a private bank account, Dai exists completely on the Ethereum blockchain and this is a huge part of its appeal.
Dai is a collateral-backed cryptocurrency, which means that there is no middleman in how it is pegged to the US dollar and its stability is autonomously maintained using smart contracts that adapt according to market dynamics. This guarantees that Dai remains pegged to the US Dollar and provides traders with stability regardless of the state of the market.