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How to Generate DAI with a Maker Vault

How to Generate DAI with a Maker Vault

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) or BAT. And then, you’re able to generate or borrow up to 2/3 of the US dollar value of your collateral in DAI. In other words, your Vault’s ratio of collateral value to total debt in DAI must be above 150%.

For every 1 DAI, there is at least $1.50 worth of collateral locked into a Maker Vault. And 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 150%.

Using Maker’s Oasis portal to borrow your first DAI

Navigate to Maker’s Oasis Borrow.
There are many ways to interface with a Maker Vault; Oasis is open-source and was developed by the Maker.

Connect the wallet of your choice and click ‘Get Started’
MetaMask is a browser extension commonly recommended for interacting with many 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 ‘Continue’
ETH and BAT are the only supported collateral types as of writing this. In this example, we selected ETH.

Setup Vault and Set Allowance
Follow the prompts to send a few transactions in preparation for opening your Maker Vault and generating DAI. We recommend referencing EthGasStation for the latest gas prices.

Deposit Collateral and Generate Dai
Enter the amount of collateral you’d like to deposit and the amount of DAI you wish to generate. You cannot withdraw the collateral until you pay back any DAI you generate or borrow. Note, opening a Vault requires a minimum of 20 Dai to be generated. Click continue and confirm your transaction.

Wait for your newly generated DAI to arrive in your wallet
Once submitted, your transaction may take a moment depending on the gas price you paid. Finally, your transaction will be confirmed and your DAI should be 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. You can trade DAI for ETH, MKR, and many other ERC20 tokens at the best prices in DeFi using a DEX aggregator like DEX.AG.

You can earn interest by lending out your DAI on other DeFi lending protocols. Remember to keep in mind the stability fees you’ll owe on any DAI you generate or borrow from your Vault. And also, consider the various risks involved in lending some of which we cover in our Zero to DeFi guide.

Another way to earn interest is to deposit DAI into Maker’s Dai Savings Rate (DSR). The DSR allows users to lock in DAI to earn a variable interest rate. However, don’t go generating DAI just to deposit it into the DSR because the DSR is designed to be lower than the stability fee. Learn more about the Dai Savings Rate.

You’d be surprised the many interesting ways you can use your DAI! Explore a full list of ecosystem resources composed by the Maker community.

Learn more about Maker and the world of decentralized finance (DeFi)! Come chat with us and stay informed in our Telegram or Discord.


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