Dai (DAI): What It Is, Uses and Risks

Dai (DAI) is a US dollar stablecoin that began as the token of the Maker Protocol, run by MakerDAO. It is an ERC-20 token on Ethereum, and it aims to stay worth about one US dollar. Unlike stablecoins issued by a single company holding bank deposits, Dai was designed to be backed by crypto assets locked in smart contracts.

Dai first appeared in 2017 as a version backed only by ether. The newer Multi-collateral Dai, described in the project's own materials, is backed by several kinds of assets. Anyone can generate Dai by locking approved collateral in a Maker Vault and borrowing against it. The value of the collateral is meant to exceed the value of the Dai issued, which is the main source of its stability.

As of 2026-11-05, Dai ranks around 22nd by market capitalization, at roughly $4.55 billion, and trades very close to $1. It is usually grouped with both stablecoins and DeFi tokens, because it is a payment-style asset and also a building block for lending and trading apps.

Dai is mostly a unit of account and a store of dollar value inside decentralized finance. People hold it when they want exposure to a dollar-priced asset without leaving the crypto ecosystem, and they send it to others in the same way as any other Ethereum token.

Common uses include:

• Borrowing and lending. Lending markets such as Aave and Compound have listed Dai, so it can be supplied to earn interest or borrowed against other crypto.
• Trading pairs. Decentralized exchanges such as Uniswap and Curve have deep pools where Dai is paired with other tokens, which makes it a common route between volatile assets and a dollar-priced one.
• Collateral. Other protocols accept Dai as collateral or as a settlement currency.
• Savings. The Maker system has offered a Dai Savings Rate, which lets holders earn a variable return set by governance.

Dai is not a governance token. Voting power in the Maker ecosystem sat with a separate token, MKR, which was later reorganized under the Sky brand. Dai itself is the dollar-priced unit that users borrow, hold and spend.

New Dai is created when a user opens a Vault, deposits an accepted collateral asset and draws Dai against it. The amount that can be drawn is limited by a minimum collateralization ratio, which differs by asset. To get the collateral back, the user repays the Dai plus a stability fee, a variable interest rate, and the repaid Dai is destroyed.

If the collateral falls in value so that a Vault becomes too thinly covered, the protocol can liquidate it. The collateral is auctioned off to cover the debt and a penalty, which is how the system tries to avoid ending up with Dai that is not fully backed.

Two other tools help hold the peg. Governance can change borrowing rates, which nudges demand to mint or repay Dai. The Peg Stability Module has allowed users to swap certain other stablecoins for Dai at a fixed rate, which pulls the price back toward $1 when it drifts. That module made Dai more dependent on centralized stablecoins, a point covered under risks below.

Dai has no fixed maximum supply. The amount in circulation rises when people borrow against collateral and falls when they repay, so it follows demand rather than a schedule. There is no mining, no halving and no inflation programme in the usual sense.

As of 2026-11-05, circulating and total supply were both about 4.55 billion DAI, giving a fully diluted value that matches the market cap of about $4.55 billion. Reported 24-hour trading volume was about $159 million, and the price had moved by well under one percent over the past week.

Because the token is meant to hold a peg, its price history is a narrow band around one dollar rather than a growth chart. The recorded all-time high is about $1.22 on 2020-03-12, and the recorded all-time low is about $0.88 on 2023-03-10. Both were stress events rather than normal trading.

The main economic return in the system comes from stability fees paid by borrowers and, in the Maker model, from yield on collateral, which governance has used to fund savings rates and operations.

Dai was issued on Ethereum, and most of its history and liquidity sit there. Versions of Dai have also been made available on other networks through bridges and other deployments. Each network may carry a different representation of the token, so it is worth checking which one a wallet or app is actually using before sending funds.

You can hold Dai in any wallet that supports Ethereum tokens, including browser extension wallets, mobile wallets and hardware wallets. Moving it requires a small amount of ether to pay network fees on Ethereum, or the equivalent gas token on other networks.

Dai is traded on many centralized exchanges and on decentralized exchanges. On a centralized exchange, the exchange holds the tokens for you. On a decentralized exchange, you connect your own wallet and swap directly through smart contracts.

Dai is also a core asset in many DeFi apps, so it is often held inside a protocol as a deposit rather than in a wallet. In that case, the position is a claim on a smart contract, which adds that contract's risks on top of Dai's.

The original single-collateral Dai launched in 2017 and was backed by ether alone. The multi-collateral version followed, widening the list of assets that could back it. Since then, Maker governance has voted on which collateral types to accept, including some tokenized real-world assets and other stablecoins through the Peg Stability Module.

Two events stand out. In March 2020, a sharp fall in crypto prices and heavy congestion on Ethereum caused many Vaults to be liquidated, and Dai traded above its peg, reaching about $1.22 on 2020-03-12. Some liquidations were completed at very low bids, which left the system with a shortfall that was covered afterwards.

In March 2023, concerns about the reserves behind the stablecoin USDC pushed Dai down to about $0.88 on 2023-03-10, because a large share of Dai's backing then sat in USDC. The peg recovered once confidence in USDC returned.

Maker later rebranded as Sky, introducing the USDS stablecoin and the SKY token, and offering a path to convert Dai into USDS. Dai remained in circulation alongside it. Check current project announcements for how the two are handled today.

Risks. Dai's peg is not guaranteed. The main risks are:

• Collateral risk. A sharp market fall, or failure of a major collateral asset, can leave the system under-collateralized.
• Dependence on other stablecoins. Because part of the backing has been in centralized stablecoins, problems at those issuers can pass through to Dai, as seen in March 2023.
• Smart contract risk. Bugs or exploits in the protocol, bridges or apps that use Dai can cause losses.
• Governance risk. Token holders vote on collateral and rates, and those decisions can be wrong or contested.
• Real-world asset and legal risk. Some backing now involves off-chain assets and counterparties.
• Rebranding confusion. The move to Sky and USDS means old and new tokens and interfaces can be mistaken for each other.

Storing Dai safely. For larger amounts, a hardware wallet keeps your keys offline. Write down the recovery phrase on paper and never share it or type it into a website. Confirm the token contract address and network before sending, and try a small test transaction first. Be cautious about approving token spending for unfamiliar apps, and revoke approvals you no longer need. This is general information, not financial advice.