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The Dai Stablecoin System

The Dai Stablecoin System whitepaper introduces a decentralized, collateral-backed stablecoin, Dai, designed to maintain a soft peg to the US Dollar without rel

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Abstract

The Dai Stablecoin System whitepaper introduces a decentralized, collateral-backed stablecoin, Dai, designed to maintain a soft peg to the US Dollar without reliance on a centralized issuer or custodial backing. The system utilizes a mechanism of collateralized debt positions (CDPs) managed by smart contracts, where users lock up crypto-assets (such as ETH) to mint Dai. The stability of the peg is maintained through a combination of autonomous feedback loops, such as the Stability Fee (an interest rate paid by borrowers) and the Dai Savings Rate. If the value of the collateral drops below a threshold, the system triggers an automated liquidation process to ensure the solvency of the minted supply. By decentralizing the issuance and governance processes through the MakerDAO community and MKR token holders, the system aims to create a censorship-resistant stable store of value. This paper is essential for understanding the evolution of synthetic assets and decentralized monetary policy on blockchain networks, highlighting how autonomous systems can achieve price stability through game theory and over-collateralization. Authors: Maker Foundation Publication: Project Whitepaper Publication date: 2017-01-01

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Key findings

  • Introduces the concept of a decentralized, over-collateralized stablecoin.
  • Describes the use of Collateralized Debt Positions (CDPs) for minting Dai.
  • Details stability mechanisms including the Stability Fee and automated liquidation.
  • Proposes a decentralized governance model via the MKR token.

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Citation

Maker Foundation (2017). The Dai Stablecoin System. Project Whitepaper. https://makerdao.com/whitepaper/Dai-Whitepaper-Dec17-en.pdf
Canonical knowledge ID: research:the-dai-stablecoin-system