Hi everyone, This is my homework post for week 6 and it is about stable coin. Thanks to Professor @yohan2on for excellent lecture.

What is Stable Coin?

In very simple words, stable coin can be described as cryptocurrency token with stable price. This stability in the price is achieved by pegging them to assets like Gold and fiat currencies. This feature of stable coins, being backed by traditional investments, creates more confidence of market in their price. Institutions and users of Cryptocurrency are at ease while trading in stable coins.

Bitcoin and other cryptocurrencies are highly volatile, hence these are not suitable for daily use. In this scenario, there is need of a crypto asset that is Decenterlized and also with stable price. It necessitated the invention of stable coin. Stable is also deemed necessary to act as a store of monetary value and act as medium of exchange.

There are many stable coins in the market right now like BitUSD, Tether (USDT), USDC, DAI etc. BitUSD was the first stable coin. We will discuss about DAI stable coin in my homework post.

What is DAI.

DAI was launched in year 2017. It runs on Ethereum Blockchain. It is pegged to United States Dollar (USD). Its ratio has been maintained at 1:1. It means 1 DAI will be equal to 1 USD. DAI is ERC-20 token and it is the integral part of MakerDAO lending system. When a User takes out a loan from MakerDAO, DAI is created against a collateral asset and given to the borrower. The Borrower can only pay back with DAI.

Self-executed smart contracts are used to keep the price of stable coin in check. Automatic mechanism known as TRFM is empoyed to maintain stability of DAI. When the price fluctuates, DAI stable coins are created or burned for stabilization of price at 1 Dollar by the system.

DAI platform is an open-source protocol that can be used by anyone to create DAI tokens. For this purpose, assets of the user are used as collateral against issued DAI.

Features of DAI.

• DAI ensures the stability of its value irrespective of the volatility of crypto market.

• The price of DAI remains stable at 1 $. There may be very little or no volatility in its price.

• DAI coins are widely accepted for global payments and remittances. These stable coins are an efficient solution for settlement of International payments.

• DAI acts as a stable hedge against high price volatility of other digital currencies like Bitcoin, Ethereum etc.

• DAI is a safe haven for investors during volatile market. Traders can convert their assets to DAI in bear market to protect their position.

• DAI holders are rewarded for their holdings locked through smart contracts.

• DAI can also be traded on Exchanges. Hence traders can increase their crypto holdings by entering and exiting market using DAI. There are many pairs of DAI and it can easily be traded against other digital currencies. I have attached a screenshot showing different pairs of DAI.

Image source

Conclusion.

High volatility of the Cryptocurrency market is a challenge, and it necessitated the invention of Stable coin. Thus, DAI is the one of these stable coins and it has been successfully taking care of the high volatility of crypto market. DAI has a great future and it is being adapted by traditional users of cryptocurrency as well as institutions.

Special thanks for support.

@steemcurator01

@steemcurator02

@yohan2on