What is the mechanism of stable coin Dai equals to 1 dollar?


#1

Dai is hot.

Dai is a creative stable coin, but the truth is: 1 Dai cannot 100% equals to 1 $.

There is a market regulation mechanism that maintains the price, how does it work?


#2

The key point of Dai is that, the proportion between Dai and Eth( the backed token, might wBTC this month, they are building ERC20 Bitcoin with many partners) is fixed. For example, Eth is 100 dollars now (now is 130+ but to make it sample I use 100).

so Dai : Ether = 100 :1

So let’s assume that Dai now is 2 dollar, it’s wrong, so people will add more Ether to create more Dai( at this time, 1 Ether is 100 dollar, but it can create 100 Dai which have 200 dollar’s value). It do have premium here.

so people will add ether to create Dai, and use Dai to buy Ether, and finally the price of Dai will decrease to 1 dollar.

if Dai is 0.5 dollar in value, people will buy Dai and return Dai to the contract to get ether back.

Those mechanism makes Dai stable.


#3

Let’s assume eth is 100 dollars and Dai is 1 dollar , I think Dai: Ether = 100:1


#4

Can I understand that it is to stabilize the price of DAI through the supply and demand of the market? And how does DAI work, can we mortgage ETH to change DAI?


#5

Very close.

The word “mortage” relates to bank, the smart contract CDP replace the bank and switch your eth to Dai with a proportion.


#6

Sure,my mistake.