Coin columns · Ethereum City (Capital)
Dai (DAI): The Decentralized Dollar Minted Against Collateral
From MakerDAO to Sky: vaults, overcollateral and USDS
DAI is a stablecoin designed to track one US dollar, issued not from a bank account but against collateral locked in smart contracts. MakerDAO launched it in 2017, and it is still used after the project renamed itself Sky in 2024.
1. Who started it and how
DAI grew out of the Maker project that Danish developer Rune Christensen started in 2014. The first version, backed only by ether (ETH), arrived in December 2017; in November 2019 it became Multi-Collateral Dai, accepting several asset types. Rules have been set by MKR holders voting in a decentralized autonomous organization (DAO).
In August 2024 MakerDAO rebranded as Sky, and in September it introduced a new stablecoin, USDS, and a new governance token, SKY. DAI swaps 1:1 for USDS and MKR for SKY at 1:24,000, while DAI itself remains in use. On the Crypto Nation map, DAI stands in Ethereum City (the capital), because it was first issued on Ethereum.
2. Vaults and overcollateralization
To create DAI, a user locks assets such as ETH in a smart contract called a vault and borrows less DAI than the collateral is worth. If the collateral falls below the required ratio, it is auctioned to repay the debt (liquidation). Borrowers pay a stability fee, like interest, and get their collateral back when they repay.
Several tools hold the price near one dollar. The Peg Stability Module (PSM) swaps DAI 1:1 with stablecoins such as USDC, and the Dai Savings Rate (DSR) pays interest to depositors, steering demand. From around 2022 the protocol also accepted real-world assets (RWA) such as US Treasury bills, turning DAI’s backing into a mix.
3. Uses and milestones
DAI is one of DeFi’s longest-serving stablecoins: a trading pair on decentralized exchanges, collateral and a loan asset on lending markets, and a way to pay. For early DeFi users it mattered that DAI was minted and redeemed through public smart contracts rather than a company’s bank account.
In the ‘Black Thursday’ crash of March 2020, some ETH collateral was auctioned for almost nothing, and the shortfall was covered by minting and selling new MKR. The auctions were later reworked, and a USDC-based PSM followed at the end of 2020. Since 2024 DAI has been used alongside USDS in the Sky ecosystem, which includes sub-projects such as the lender Spark.
4. Things to know
Although called decentralized, DAI has drawn much of its backing from assets that rely on centralized firms, such as USDC and real-world assets. When USDC briefly fell below a dollar after Silicon Valley Bank failed in March 2023, DAI dipped below its peg too.
Smart-contract bugs, oracle problems (oracles feed prices on-chain) and cascades of liquidations in a sharp sell-off are ever-present risks. Critics say governance votes can be swayed by large holders, and the rebrand and USDS caused some confusion. How regulators will treat such stablecoins is still being settled country by country.
Written from information public up to October 2026. It does not recommend or rate any coin and is not investment advice. If something is wrong, please tell us through the contact page.