DAI
A crypto-backed stablecoin designed to track the value of the U.S. dollar without relying solely on bank deposits.
DAI is a stablecoin designed to stay close to 1 U.S. dollar in value. It is best known for being issued through the Maker protocol, where users can create DAI by locking approved crypto assets as collateral. Unlike many dollar stablecoins that depend mainly on cash or bank-held reserves, DAI is primarily backed by on-chain collateral and managed through smart contracts and protocol governance.
DAI matters because it gives crypto users a relatively stable unit of account for trading, lending, borrowing, payments, and moving value between decentralized finance apps. For example, someone might swap a volatile asset like ETH into DAI to reduce price exposure without leaving the blockchain ecosystem, or use DAI as collateral in a lending market. Its dollar peg can still fluctuate, and it carries risks tied to collateral values, liquidations, governance decisions, and smart contract security.
Other terms in Stablecoins
Algorithmic Stablecoin
A stablecoin that uses software rules and market incentives to try to keep its price near a target, usually without full collateral backing.
Collateralized Stablecoin
A stablecoin backed by assets held as collateral to help keep its price close to a target value, usually a fiat currency like the US dollar.
Depeg
A depeg happens when a stablecoin or pegged crypto asset trades noticeably away from the value it is meant to track.
Peg
A peg is a target value that a stablecoin or crypto asset is designed to maintain relative to another asset, such as the US dollar.