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MakerDAO is a decentralized credit platform on Ethereum that supports Dai, a stablecoin or ERC-20 token that attempts to maintain a 1:1 peg to USD. MakerDAO is responsible for developing and maintaining the software that powers the DAI stablecoin system. Through this software and the Maker Protocol, new DAI tokens can be generated as debt against deposited collateral. The early version of the DAI token was backed by only ETH and was known as Single Collateral DAI (now referred to as SAI). Currently, DAI is backed by different digital currencies deposited into its smart contract vaults. The latter version of the multi-collateral DAI token was unveiled in November 2019. Users can borrow Dai up to a certain percentage of their collateral’s value (AKA collateralization ratio). Dai debt incurs a stability fee (i.e., continuously accruing interest set by MakerDAO), which is paid upon repayment of borrowed Dai. Vaults that fall below that rate are subject to a 13% penalty and liquidation (by anyone) to bring the Vault out of default. Liquidated collateral is sold on an open market at a 3% discount. DAI holders can lock their DAI into Maker’s Dai Savings Rate (DSR) contract and earn a variable interest rate in DAI, which is generated from stability fees. The rate for this savings deposit is set by the MakerDAO Community.
Users can generate DAI as debt when an equivalent amount of collateral is deposited in a smart contract governed vault. It can also be used as a currency to make payments for digital art. The detailed uses of the stablecoin can be found here.