How New Blockchain Apps Make It Easier To Use DeFi
June 25, 2021
Harnessing blockchain technology, MakerDAO has unlocked money’s versatile potential through its decentralized Dai stablecoin. Generated via the Maker Protocol and backed by a surplus of collateral, Dai is soft-pegged to the US Dollar. Simply put, Dai is digital cash. Think of it as a better, smarter dollar.
Unlike traditional fiat currencies, Dai is unbiased—available to anyone, anywhere—and it is not caged by the parameters of conventional financial services (slow payment settlement and expensive fees, for example). As a result, Dai leads the pack of digital tokens used in the growing Decentralized Finance (DeFi) space.
Every day, more and more people around the world discover the use cases and benefits of the Dai stablecoin. Here are the top 10:
To participate in the traditional financial system, banks and other financial services companies require a lot from would-be users, including personal data, proof of good credit, and even minimum deposit amounts. These requirements can be stifling and create more un- and underbanked people of the world, not less. The Dai stablecoin, however, allows anyone anywhere, regardless of economic standing, access to financial services that provide unparalleled financial freedom.
In Argentina, where inflation is crippling, the government has routinely placed restrictions on capital, including limits on withdrawals, which hurt residents who use the dollar as a savings currency. For those citizens, Dai offers a solution: easy access to a more stable currency. One Dai token is worth the same in the United States as it is in Argentina or anywhere else in the world, and it can be exchanged peer-to-peer without any interference from a central bank or any third party.
Whether a person wants to generate Dai by depositing collateral into a Maker Vault, use Dai as a payment method, trade Dai on Oasis or another popular exchange, or earn the Dai Savings Rate (DSR) on Dai held, he or she can do so without restrictions via the Maker Protocol.
Each day, people buy Dai on various exchanges to use in the ways listed here. But many others turn to the Maker Protocol to generate Dai Instead of purchasing it. The process is fairly simple: Users lock a surplus of collateral in Maker Vaults, generating Dai based on the amount of collateral they lock.
Many people generate Dai to margin-long on ETH: They lock their ETH in a Maker Vault, generate Dai, and then buy more ETH, hoping that it will increase in price. A number of business owners generate Dai to create operational capital by hedging crypto’s signature volatility while keeping their funds in the blockchain space.
Holders of the Dai stablecoin can earn the Dai Savings Rate (DSR) on the Dai they hold by locking it into a special smart contract. There are no fees involved, no geographic constraints, and no liquidity impediments—no minimum deposit is required to earn the DSR, and all or any portion of Dai can be withdrawn at any time.
The Dai Savings Rate contract is accessible through Oasis Save and other projects that have integrated the DSR, including the OKEx marketplace and the Argent wallet. The DSR is not only a propeller of financial freedom, offering complete user control, but also game-changing for the DeFi movement.
The Dai stablecoin offers stability in the volatile world of cryptocurrency. Dai is soft-pegged to the US Dollar and backed by a surplus of collateral locked in Maker Vaults. When the market is highly volatile, Dai allows users to store its value without abandoning the crypto space.
As a stable medium of exchange, Dai can be used for repayment of debt, cross-border transactions, and payment for goods and services. Sending money across borders using traditional financial services is expensive and time-consuming. For example, at the time of this writing, Bank of America charges $45 for international wire transfers of USD from the United States, while Western Union charges $9 to transfer $1,000 from a WU location in the United States to a WU location in Argentina. But because the Maker Protocol is built on the blockchain, users can transfer Dai peer-to-peer across the globe within seconds and at a fraction of the cost of traditional means (users only pay a gas fee).
Conventional financial services companies operate on set schedules, typically keeping traditional business hours. This means that while users can “bank” on a weekend (use an ATM to deposit cash and withdraw funds, for example, or use a desktop or mobile app to deposit checks and transfer money), their transactions don’t settle until the next business day.
Dai, however, is available to users 24/7 because it is decentralized and built on the blockchain. Whether a user wants to generate Dai or simply send Dai as a payment for goods or services, he can do so on his own schedule, anytime and from anywhere in the world.
Dai is easily exchanged for fiat currency through multiple regulated platforms. Coinbase and its trading platform Coinbase Pro, for example, both offer the ability to buy Dai with fiat, as well as sell Dai for fiat. Money transfer service Wyre is another effective gateway in and out of Dai stablecoin holdings.
The decentralized Maker Protocol allows users both macro and micro insight into how Dai and the DSR work. Blockchain technology also has its own built-in checks and balances, as all transactions are shared on a public ledger for anyone to view. Moreover, technically-minded users can review Maker’s audited and formally verified smart contracts to see, at a granular level, how these financial technologies work. One could never expect this level of transparency from the legacy financial world.
Dai adoption is on the rise. The more projects that integrate Dai and/or the features of Dai, such as the DSR, the more people use the stablecoin and the more the Maker ecosystem grows. Dai allows developers to offer users of their own platforms the ability to transact with a stable asset, opening the door to more risk-averse participants. The growing developer base and Dai user base also contribute to the network effect of the Maker Protocol, increasing awareness and improving the stability of the ecosystem.
The Dai stablecoin is a key component of the DeFi movement as a store of value, a transactionary asset, a passive income generator, and a measure of collateral in Maker Vaults. As more people see the benefits of an open, permissionless system that is secure and non-exclusive, the more the movement will grow.
Dai also offers advantages to niche users. For example, Dai usage among blockchain-based gamers is growing. In June 2019, Maker teamed with Axie Infinity, Inc. to introduce Dai as an in-game currency of its popular blockchain game set in a digital pet universe. Not even one year later, in March 2020, the Maker Foundation introduced its Dai Gaming Initiative, a targeted approach to helping Dai reach critical mass in the global economy. Dai is also frequently used in disaster relief efforts to provide stable funds quickly and easily to those who need them.
Cryptocurrency and blockchain technology allow for efficient and trustless ways to transact, save, and conduct business without third-party interference. Together, the above use cases for the Dai stablecoin allow any individual or business to realize the advantages of digital money.
To learn more about the Maker Protocol and Dai, read the new whitepaper. When you’re ready to explore Dai first hand, visit the Oasis DeFi Hub.