Dai is the native stablecoin for the Maker protocol. It is the world’s first crypto-collateralized and decentralized stablecoin, whose value is soft-pegged to the US Dollar. The collateralized assets backing Dai are other cryptocurrencies instead of fiat and are held within smart contracts rather than in institutions.
Maker is a smart contract lending platform that enables users to take out loans by locking-in collateral in exchange for Dai. It was founded by the Maker Foundation in 2015 as an open-source project to offer economic freedom and opportunities to anyone, anywhere. In 2017, it launched the Maker governance token (MKR) and its first stablecoin iteration known as the Single Collateral Dai (SAI), which used Ether (ETH) as collateral.
In principle, Dai is similar to a loan or mortgage. In traditional finance, these credit facilities are obtained from financial institutions upon fulfilling several stringent requirements such as the provision of sufficient collateral, robust credit scores and compliance with KYC and criminal background checks. The key difference with Dai, however, is that only collateral in the form of cryptocurrencies is needed, and Dai loans are issued in a decentralized manner via smart contracts.