DAI is an algorithmic stablecoin, which means it is a cryptocurrency that is backed by a series of algorithms and protocols rather than an actual asset such as the US dollar or gold. This makes DAI stable in value and does not fluctuate as much as other cryptocurrencies.
DAI works by using a network of smart contracts and a currency called Ether, which is the native currency of the Ethereum network. Users can obtain DAI by depositing Ether into a special smart contract called Collateralized Debt Position (CDP). Then, they can use DAI as an exchange currency to make transactions or they can buy back Ether by returning DAI to the CDP.
By using this system, DAI maintains its value stable and is kept in equilibrium by automatically adjusting the amount of Ether required to open a CDP. If the value of DAI starts to decrease, more Ether will be required to open a PDC, which increases the demand for Ether and thus increases the value of DAI. Similarly, if the value of DAI starts to increase, less Ether will be required to open a PDC, which reduces the demand for Ether and thus reduces the value of DAI.
In short, DAI is an algorithmic stablecoin that keeps its value stable by automatically adjusting the amount of Ether required to open a PDC. If you are interested in a secure and convenient way to transact cryptocurrencies, then DAI may be an option to consider.
