Why ETH Can Go From $4000 to $1000 While Dai Stays $1
After almost a decade since the first cryptocurrency was launched, there are now thousands of cryptos available, all competing for different market values and valuation. We will take a look at how both ETH and Dai are used, which factors make the price of ETH fluctuate compared with Dai’s stable nature and its use cases.
What is the difference between ETH and Dai?
Ether (ETH) is the cryptocurrency of the Ethereum network, and the second-largest crypto behind Bitcoin by market capitalization. The Ethereum network is an open-source platform that allows developers to create other decentralized currencies and dApps. ETH started trading in 2015 and valued at $0.31 per token, while it saw an all time high of <$4,500 in 2021. This shows how crypto value can change over time by factors including market supply and demand.
Dai is an ERC-20 stablecoin currency on the ethereum blockchain who’s value tracks as close to 1 USD as possible. Dai is soft-pegged to the USD because it is backed by cryptocurrency collaterals Introduced by the MakerDAO project (MKR), a decentralised autonomous application (DAO). It is the first example of decentralised finance that received significant adoption. Dai is the fourth largest stablecoin by market capitalization. The top three (USDT, USDC and BUSD) are not decentralised stablecoin like Dai.
The Dai stablecoin works through a system of smart contracts which are maintained and regulated by MakerDAO, which ensure the stability of Dai using the native token MKR. The system therefore works without any centralized trust in institutions: instead, the MKR holders are a decentralized community of people who ensure the stability of the peg voting on system parameters. Anyone who holds MKR can participate in the governance voting and participate in the management of the system.
How are ETH and Dai used?
ETH can be bought and sold on centralized exchanges like Gemini and Coinbase and used on decentralized platforms like Oasis.app and Balancer, which offer many different products to swap tokens, and earn with your assets. ETH’s uses are definitely showcased in DeFi as the variety of products is ever growing, but while on centralized exchanges, it is somewhat limited to buying and selling.
Dai can be borrowed and repaid over time, and can also be used to buy and exchange other tokens, but the value will remain stable regardless of supply and demand. It is always backed by other assets worth more than Dai, much like how traditional money used to be backed by gold reserves, as it is backed by a surplus of collateral.
Why does the price of ETH change and Dai's doesn't?
The ETH price fluctuates with supply and demand. ETH is valued by user dependent factors and it is created through a proof of stake (PoS) consensus. Thus ETH's price will depend on the supply and demand for the crypto currency, similar to the stock market.
Dai’s peg to the USD is facilitated by smart contracts, ensured by the Governance functions on MakerDAO and is regulated through vote. The technology ensures that for every Dai that exists, the proper amount of crypto is collateralized.
So, will the Dai ratio stay the same? Yes. There are multiple layers in place to ensure that Dai will keep its 1:1 ratio. You can read more in MakerDAO's Whitepaper.
What can I do with Dai on Oasis.app?
The Dai stablecoin can be used anywhere, by anyone, at any time of day, regardless of their traditional financial position. Whether a person wants to use Dai as a payment method, trade Dai or generate Dai with crypto collateral, it is always available without restrictions or third-party middlemen.
While Dai is generated via the Maker Protocol, Oasis.app is the most trusted entry point to access the maker protocol and create Dai. At Oasis.app, we allow users to deploy their capital into DeFi and manage it in one trusted place with ease.
The Oasis.app facilitates a variety of product options for Dai to be easily accessible, on a user-friendly platform. Users can choose to borrow, multiply or earn on your assets.
Oasis Borrow lets users borrow Dai against a crypto collateral with a host of different collaterals to choose from including ETH, WBTC, LINK and more. Since Dai is a stablecoin users can access extra liquidity for trading, spending or saving.
Oasis Multiply employs multi-layered features to use your borrowed Dai to buy more collateral on the Oasis.app. Multiply allows users to increase or decrease exposure to a single asset in one transaction. You can use your Eth (or other maker supported collateral types) to create a multiply position and get started with our unique multiply feature.
Oasis Earn allows you to earn Uniswap v3 trading fees with your Dai. Using the G-UNI DAI collateral to generate DAI, you can multiply your position with a G-UNI vault, and collect fees earned from being a liquidity provider in Uniswap v3.
Check out our Knowledge Centre to learn more about how to get started.
Dai is a fast, efficient and low-cost remittance compared to what it takes to exchange traditional currencies across borders. Fees and taxes for sending and exchanging money abroad can build up, particularly for the inclusion of countries experiencing difficulties related to high inflation rates. Dai can be used for payment of goods and services, debt repayment and cross-border transactions with minimal costs and constant stability.
What else can I do with Dai?
Dai is also used and supported by other platforms, in the DeFi community and beyond, for many other use cases that includes (but is not limited to):
- Crypto exchanges and marketplaces such as Wyre, Opensea, Wiv and the Panda Exchange for Latin America.
- Dai in wallets to hold your Dai such as Metamask, Ledger, Trezor, Keep Key, Anchorage and also mobile wallets like Trust Wallet, and Exodus.
- DeFi products and platforms like Ren, 1Inch, Uniswap, and Curve.
- Gaming products such as Sandbox, Blocklords,
- Community services including Foundation, the Museum of Contemporary Digital Art, and Althea for bandwidth.
- Many more brilliant uses for the Dai community can be found here.
August 30, 2022