DAI is an ERC20 token designed to maintain a peg to the US Dollar, also known as a stablecoin, generated and maintained by the Maker Protocol. Every single DAI in existence has been generated by users locking collateral into Maker’s smart contract system and opening what’s called a Vault.
When you open a Maker Vault, you lock in collateral such as ether ETH, WBTC, LINK, or beyond. Then you’re able to borrow against this your collateral in DAI. Every Vault has its own risk parameters, so the minimum collateral ratio of Vaults ranges from 101% to 175%. In other words, your Vault’s ratio of collateral value to total debt in DAI must be above 101% if not higher!
If your collateral value falls, you must lock in more ETH, pay back some of your debt, or risk having the collateral in your Vault liquidated. When a Vault position is liquidated, the held collateral is automatically sold to pay back the debts in addition to a penalty fee for failing to keep your collateral ratio above its minimum threshold.
How to use Oasis Borrow to open a Vault
Navigate to Maker’s Oasis Borrow
Oasis Borrow is a front-end application for easily managing Maker Vault positions. This is what you’ll borrow DAI through. To get started, you’ll need 1) a compatible wallet, 2) a supported collateral type, and 3) ETH for gas.
Connect the wallet of your choice and click “Get Started”
MetaMask is a browser extension commonly recommended for interacting with decentralized apps, or DApps. Ledger and Trezor are hardware wallets. Wallet Connect and Coinbase Wallet allow you to scan a QR code to access Oasis via mobile wallet.
Select a collateral type and click “Open Vault”
Maker supports a wide range of collateral types. For a full list of supported tokens, review the Oasis Borrow Vaults list. Then click “Open Vault.”
Configure your Vault
Follow the prompts to configure your Vault. This process starts by inputting how much crypto you would like to deposit. Next you’ll press “Confirm” and then “Create Vault.” Note, opening a Vault currently requires a minimum of 10,000 Dai to be generated.
Wait for your newly generated DAI to arrive in your wallet
Once submitted, your transaction may take a while depending on the gas price you paid. Finally, your transaction will be confirmed and your DAI will become available in your wallet!
What can I use DAI for?
DAI is one of the most liquid assets in the DeFi ecosystem. You can spend, save, lend, and tons more with your DAI — it’s up to you! You can also explore this list of ecosystem resources composed by the Maker community. Just remember to keep in mind the stability fees you owe on any DAI you generate or borrow from your Vault as time goes on.
If you’re interested in learning more about Maker and the world of DeFi, come chat with us any time in our Telegram or Discord.
