Since most cryptocurrencies have been experiencing high volatility, stable coins are starting to gain popularity. Tether or USTD is one of the most popular stablecoins among crypto investors, yet there is controversy behind their auditing reports. There have been uncertainties that Tether is being backed or funded by a bank due to its failure of providing some insight to its bank account. Despite some stablecoins being centralized, it still holds value to a certain degree as fiat currencies as compared to highly volatile cryptocurrencies.
While fiat currencies back other stablecoins, others control the number of coins being circulated. Another method of managing coins can be done through a blockchain platform. MakerDAO DAI implements a system of keeping its value stable by deploying smart contracts through Ethereum. Blockchain networks such as Ethereum provides DAI with an alternative solution to volatility instead of relying on fiat assets. Because DAI is functionally decentralized, it can automatically liquidate with secured collateral of at least 166% when the coverage index falls below 150%. DAI currently has 70 million coins. MakerDAO also earns tokens from another coin known as MKR. Similar to Ethereum’s network, MKR offers voting rights to its participants and the option to pay borrowed rates. The method that DAI implements have proved its reliability and other benefits that come with it.
It is possible for DAI to compete against Tether as a stablecoin, but it is less likely to happen as of now. The main concern with DAI is that it lacks trading pairs as compared to a fiat currency. Most exchanges rely more on centralized institutions than decentralized systems. Support for DAI is growing as the coin continues to expand and influence crypto investors.