Buy Maker Dai in Australia

Maker Dai

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What is Maker Dai?

What is Maker DAI? Want to buy DAI on CoinJar? Here’s what you need to know.

Understanding MakerDAO and the DAI Stablecoin

MakerDAO is a decentralised autonomous organisation (DAO) built on the Ethereum blockchain. Its mission is to create a stable and decentralised digital currency. Let’s dive into the details of what Maker DAI is and how you can acquire it.

What is DAI: The simple explanation

Here’s a simple way to describe how it works. Imagine you have a coin called “DAI.” It’s like a regular coin, but it always tries to stay worth the same as one U.S. dollar.

So how does it stay stable? It is created using something called a “smart contract” on the Ethereum blockchain. Think of this smart contract as a set of rules that govern how the crypto works.

Say you have some Ethereum (ETH). You can use it as a kind of security deposit to create Dai. This is done through a platform called the Maker Protocol.

Think of it like this: You put your ETH in a digital vault called a “Collateralised Debt Position (CDP)”. It's like putting your ETH in a safe. Then, the Maker Protocol gives you Dai in return, based on how much ETH you put in.

Now, here's the catch: because the value of cryptocurrencies can change a lot, you have to put in more ETH than the value of the Dai you want to get. This is called over-collateralisation.

For example, if you want $100 worth of Dai, you might need to put in $200 worth of ETH. This is to make sure that even if the value of ETH goes down, there's still enough value to cover the Dai.

When you want to get your ETH back, you have to return the Dai you borrowed, plus a small fee for using the Maker Protocol. It's like paying rent for using the vault.

So, in simple terms, Dai is digital money you can get by trading it for Ethereum, or by using Ethereum as a deposit in a special digital vault called a CDP.

What stability means for users

DAI ideally offers stability (but nothing is guaranteed in stablecoin world!). This is good for things like online shopping (mostly with merchants accepting funds via payment companies that enable crypto payments). You can theoretically use it to buy things online, just like using dollars.

Regular cryptocurrencies (like Bitcoin) can swing up and down a lot in price. DAI aims to stay steady in price.

When you send DAI to someone in another country, they should get the same value without worrying about exchange rates.

Say your cousin in America needs some cash. Instead of dealing with exchange rates and bank fees, you send them DAI instead. This is without all the bank fees and then the banks converting currency in their favour.

Because the price theoretically stays stable, people use it in decentralised finance (DeFi) apps. These apps let you lend, borrow, and earn interest.

Other uses

It has other uses. Imagine you’re a crypto trader. When other coins swing wildly, you can switch your existing crypto into DAI to keep stability.

You can lend your DAI on platforms like Compound or Aave. Your DAI earns interest, and you don’t lose sleep over price fluctuations.

What is DAI? A more technical explanation

It is a stablecoin pegged to the US dollar. Unlike other cryptocurrencies, its value remains relatively stable, making it suitable for everyday transactions.

It is created through a system of collateralised debt positions (CDPs). Users lock up crypto assets (such as Ethereum) as collateral to generate DAI.

The collateralisation ratio determines how much of it can be minted against the locked assets.

If the value of the collateral drops, users may need to add more assets or repay part of their debt.

Outstanding debt refers to the total amount of DAI in circulation.

MakerDAO components

Smart contracts

MakerDAO relies on smart contracts to manage the creation and redemption of DAI. These contracts ensure transparency and security.

MKR tokens

MKR is the governance token of MakerDAO. MKR holders participate in decision-making processes, including voting on stability fees and other protocol changes.

Stability fee

When users create DAI, they pay a stability fee. This fee compensates MKR holders and helps maintain the stability of the system.

DAI Savings Rate (DSR)

The DSR allows users to earn interest by holding the crypto in a savings account within the MakerDAO ecosystem.

How to Buy Maker Dai on CoinJar

Sign Up: If you don’t have a CoinJar account, sign up at CoinJar. Deposit Funds: Deposit funds (such as AUD or BTC) into your CoinJar account. Choose DAI: It will arrive in your CoinJar account. From there you can move it into another wallet.

What risks should I be aware of?

DAI is backed by collateral who can themselves be volatile, such as Ethereum (ETH). If the value of the collateral drops significantly, it could trigger automatic liquidation of the collateral and cause the value of DAI to fluctuate.

It uses algorithmic smart contracts to maintain price stability and to ensure that the tokens are always kept fully collateralised. Users should be aware that other tokens which have used algorithmic smart contracts to maintain their value, such as Terra (LUNA) have failed, leading to total loss of value.

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How to buy Maker Dai with CoinJar

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Step oneSign up to CoinJarGet the CoinJar app on iOS or Android, create an account and verify your ID.
Step twoDeposit funds Transfer funds from your bank account using bank transfer, PayID, Osko, SEPA or Faster Payments.
Step threeBuy your first cryptoBuy Bitcoin and more than 60 other cryptos using cash or credit card.
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Frequently asked questions

What is Maker DAI?

It is a decentralised, collateral-backed cryptocurrency operating on the Ethereum network. Unlike centralised stablecoins (such as USDT or USDC), it is said to be “soft pegged” to the US dollar.

It maintains its value through a diverse basket of ERC-20 tokens deposited by users as collateral.

When the value of these tokens fluctuates, more DAI is introduced or liquidated to maintain the peg to $1 USD. It has been a major player in the decentralised algorithmic token space since 2014.

How does DAI maintain its value?

Users generate it by depositing collateral assets into Maker Vaults within the Maker Protocol.

Each DAI in circulation is directly backed by excess collateral, ensuring that the value of the collateral exceeds the debt. All transactions are publicly viewable on the Ethereum blockchain.

What is the MKR Token?

The MKR Token is the governance token. MKR holders can vote on changes to the Maker Protocol, such as adding new collateral types, adjusting risk parameters, or triggering emergency shutdowns.

How can I borrow DAI?

Users can participate in the MakerDAO system. By depositing collateral, they can mint it through smart contracts. It serves as a stablecoin soft-pegged to the US dollar, making it a useful choice for borrowing and lending within the crypto ecosystem.

Who is Rune Christensen?

Rune Christensen is the founder of MakerDAO and a key figure in the development of the Maker Protocol. His vision has driven the creation of DAI and the decentralised credit system it represents.

Who are MKR token holders?

MKR token holders play a crucial role in governing the Maker Protocol. They vote on proposals, risk parameters, and system upgrades. Additionally, MKR tokens serve as an investment in the MakerDAO system.

Interest paid by borrowers is used to buy and burn MKR tokens, reducing their supply and making them deflationary.

What are DAI tokens?

They are the native stablecoin of the MakerDAO ecosystem. They are soft-pegged to the US dollar (1:1 basis) and backed by collateral locked in Maker Vaults. It provides stability and liquidity within the decentralised finance (DeFi) space. Users can borrow DAI against their collateral and use it for various purposes.

How can I take out a loan in DAI?

To do this, follow these steps.

Collateralise: Lock up an approved cryptocurrency (such as ETH) in a Maker Vault.

Once your collateral is secured, mint DAI tokens through a Collateralised Debt Position (CDP). These tokens represent your loan amount.

Repay: As you use the borrowed DAI, remember that it needs to be repaid eventually. You can use it for trading, hedging, or other DeFi activities.

Liquidation Risk: Be cautious! If the value of your collateral drops significantly, your CDP may face liquidation, leading to the sale of your collateral to cover the outstanding debt.

What are MakerDAO smart contracts?

MakerDAO leverages Ethereum smart contracts to create a decentralised financial system. These smart contracts automate various functions within the Maker Protocol, including:

Collateralisation: Users lock up approved cryptocurrencies (such as ETH) in Maker Vaults to generate DAI tokens.

Tokens are minted through smart contracts, maintaining a soft peg to the US dollar.

Governance: MKR token holders vote on proposals and risk parameters, shaping the protocol’s evolution.

Stability: The system dynamically adjusts supply based on collateral value, ensuring stability.

Liquidation: If collateral value drops significantly, smart contracts liquidate positions to cover debt.

These Ethereum smart contracts power the Maker Protocol, providing a robust set of financial tools that fuel the decentralised finance (DeFi) ecosystem.

What is a Collateralized Debt Position (CDP)?

A Collateralized Debt Position (CDP) is a smart contract-based system created by MakerDAO on the Ethereum blockchain.

What is the Collateralization Ratio?

The Collateralization Ratio measures the percentage of a borrower’s total collateral value relative to the amount they wish to borrow.

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