DAI – everything you need to know about the stable cryptocurrency

Ole
01.10.2021
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DAI

Many people who invest in cryptocurrencies are aware that cryptocurrencies generally have very high volatility. This means that the value can rise sharply, which means that you can make good money. At the same time, the value can potentially fall just as abruptly, which is not as positive.

This is one of the main reasons why many people transfer money to a more stable cryptocurrency during periods when the value of crypto is in danger of falling sharply. This is where the stable cryptocurrency DAI comes into the picture!

What is DAI?

DAIDAI is a form of cryptocurrency, or more precisely – a stablecoin. Unlike most other forms of cryptocurrency, DAI has a very stable value. The value is linked to the US dollar (USD), and follows the exchange rate fluctuations of this currency.

This is one of the characteristics of stable cryptocurrencies – the value is linked to the value of commodities or traditional currency. DAI strives to maintain a value as close as possible to $ 1 through automated smart contracts on the Ethereum blockchain.

DAI provides security in crisis situations

According to MakerDAO , the price for one unit of DAI may deviate from 1 USD, but you will still always get back 1 USD for 1 DAI. This is because in crisis situations a function called Emergency Shutdown will be activated.

Emergency shutdown is activated, among other things, in crisis situations where DAI is exposed to data breaches or hacking, or during updates.

The function can also be triggered if the cryptocurrency market is irrationally weak over a period of time.

How does DAI work?

DAI is based on complex technology. It is not possible to explain everything in detail here, and fortunately there is no need for you to understand the mechanics behind DAI in order to buy the currency.

DAI is a stable coin that has security in cryptocurrency, more specifically Ethereum. In short, they are built on DAI smart contracts, and these are often referred to as Market Protocol or dApp. You can consider dApp as a decentralized app in the blockchain.

You can compare the purchase of DAI with borrowing money from a bank. When you take out a bank loan, you are welcome to provide security in an asset, whether it is a house or a cottage. In other words, DAI can be considered a loan where Ethereum is the security.

As Ethereum is a cryptocurrency with high volatility and exchange rate fluctuations, security must withstand these fluctuations. Therefore, you must provide 150% of the value of DAI in security. Thus, the prices for one DAI can be kept so stable.

What happens if Ethereum falls in value?

Since DAI has security in Ethereum, you may be wondering what will happen if Ethereum suddenly loses a lot of value. In such cases, the Ethereum currency will be sold, so that your loan is covered.

In other words, you do not have to worry about the value of Ethereum dropping if you have DAI.

Ethereum

Who is DAI suitable for?

DAI is an excellent cryptocurrency for anyone who wants to invest in crypto, but who at the same time thinks that the risk and volatility are too high. With DAI, you get cryptocurrency, but with a much lower risk of value fluctuations.

Many who invest in traditional cryptocurrencies such as Bitcoin or Ethereum choose to transfer the money to DAI during periods of high risk. Then they do not have to convert the cryptocurrency to a traditional currency such as NOK or USD, at the same time as the risk is low.

Where can I buy DAI?

DAI is a cryptocurrency you can buy from exchanges that sell cryptocurrency. There are several favorable sites to choose from, and we strongly recommend choosing a player who is registered with Finanstilsynet. Here are some great crypto exchanges for Norwegians:

[etoro]

You can not find DAI on the Norwegian Block Exchange at the moment, but both eToro and Firi have DAI. To buy DAI, you must first create a user account on the respective crypto exchange. You create a username and password, and enter your email.

Once you have verified your user, you are ready to make a deposit and to purchase DAI. You navigate to “markets” or similar to find the various cryptocurrencies that are sold, and DAI is among these.

Once DAI is purchased, the digital currency can be stored in a digital wallet. You can exchange DAI for Bitcoin or any other cryptocurrency, or vice versa. With the freedom to switch to DAI if needed, you can secure yourself against large falls in cryptocurrencies.

Stablecoins other than DAI?

Besides DAI, there are a number of different types of stack coins. One of the most famous is Tether, which follows US dollars in exchange rates. There is also another known form of stablecoin, and this is called USD Coin or USDC. This also has the same exchange rate as USD.

When you buy stack coins, these can have security in different values. Some have security in other cryptocurrencies, while others have security in traditional money or commodities such as gold.

Should I buy DAI?

If you are looking for cryptocurrency with less volatility than traditional crypto, DAI or other stack coins are good alternatives. You still buy cryptocurrency, but with much lower volatility.

You can also switch to DAI if you have already invested in another cryptocurrency, and fear that the value may fall sharply. Find a solution that suits you and your needs!

FAQ

[sc_fs_multi_faq headline-0=”h2″ question-0=”Hvilken type stablecoin er best? ” answer-0=”Det finnes en rekke ulike stablecoin. Dersom vi ser på popularitet, er utvilsomt Tether og DAI blant de mest populære alternativene – noe som også tyder på at disse valutaene er best.” image-0=”” headline-1=”h2″ question-1=”Hva er volatilitet på kryptovaluta?” answer-1=”Kryptovaluta omtales ofte som volatilt, noe som betyr at kursen er uforutsigbar og kan endres fort på kort tid. Dette gjør at krypto kan svinge mye i verdi.” image-1=”” headline-2=”h2″ question-2=”Hvorfor kjøpe stablecoins som DAI?” answer-2=”Ved å kjøpe stablecoins får du en kryptovaluta med stabil verdi, noe som gjør det mindre risikabelt å investere penger i valutaen.” image-2=”” count=”3″ html=”true” css_class=””]

Author Ole

Ole jobber som freelance forfatter/skribent, men er også med på vårt team. Han har hatt en interesse for krypto i flere år og det er naturlig for han å opplyse andre om denne fantastiske teknologien. Ole sier selv at å skrive om kryptovaluta ikke er en jobb, men en lidenskap! For oss kan det jo ikke bli bedre!