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Stablecoins have emerged as a way to avoid volatility in cryptocurrencies like Bitcoin and Ethereum. One such notable stablecoin is DAI, which aims to keep its value as stable as possible without the need for central administrators.
DAI is a decentralized, crypto-collateralized stablecoin that aims to maintain a 1:1 parity with the US dollar. This means that 1 DAI is designed to always be worth 1 US dollar. It aims to achieve this stability through a system of smart contracts which automatically respond to market dynamics as they happen.
The centerpiece of the Maker borrowing protocol, DAI maintains its value through a system of “over-collateralization.” This means users must deposit an amount of ETH (or other approved tokens) that is more than the amount of DAI they wish to generate and thereafter they must pay back their borrows over time.
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