【MakerDAO Blog】Top 10 Use Cases and Advantages of the DAI Stablecoin

By utilizing blockchain technology, MakerDAO unleashes the potential of currency through its decentralized stablecoin Dai. Dai is pegged to the US dollar, generated through the Maker protocol, and backed by a significant amount of collateral. In essence, Dai is digital cash, seen as a better, smarter dollar.

Original Author: Maker Blog

Translator: Shoushou

Original Link: https://blog.makerdao.com/top-10-use-cases-and-benefits-of-the-dai-stablecoin/

Unlike traditional fiat currencies, Dai is fair to anyone, anywhere, and is not subject to the constraints of traditional financial services (such as slow payment settlement and high fees). Therefore, it is at the forefront of the growing field of decentralized finance (DeFi) in the digital token business. The following are the top ten use cases and benefits of the Dai stablecoin:

1. Complete Financial Independence

Using traditional financial systems, services from banks and other financial service companies have high barriers, including providing personal data, good credit history, and even minimum deposit amounts. These requirements have left many people in the world without bank accounts. However, Dai stablecoin allows anyone, anywhere, regardless of their economic status, to access unparalleled financial services freedom.

In Argentina, where currency inflation is severe, the government often imposes capital controls, such as limiting withdrawals, which restricts residents from using the US dollar as a savings currency. Dai provides a solution for these citizens: easy access to a more stable currency. The value of one Dai token is the same in the US as it is in Argentina or anywhere else in the world, and can be exchanged peer-to-peer without interference from central banks or any third parties.

Whether it's generating Dai by depositing collateral into a Maker Vault, using Dai as a payment method, trading Dai on exchanges, or wanting to earn savings rates (DSR) by holding Dai, it is not restricted by the Maker protocol.

2. Generation of Self-Sovereign Currency

Every day, people purchase Dai on various exchanges and use it in various ways. However, many now choose to generate Dai through the Maker protocol instead of buying it. The process is straightforward: users lock excess collateral in a Maker Vault and generate Dai based on the amount of collateral locked.

Many people generate Dai with ETH as collateral to capture the long-term value of ETH: they lock ETH in a Maker Vault, generate Dai, then buy more ETH, hoping for an increase in ETH price. Many businesses generate Dai as operational funds, hedging the volatility of crypto assets while keeping their funds on the blockchain.

3. Savings

Holders of Dai stablecoin can earn interest on their Dai by locking it in a specific smart contract (DSR). There are no fees, no geographical restrictions, no liquidity barriers, and no minimum deposits required to earn DSR, allowing for the withdrawal of any amount of Dai at any time.

Dai savings contracts can be accessed through Oasis Save and other projects integrated with DSR (including the OKEx exchange and Argent wallet). DSR, entirely controlled by users, not only promotes financial freedom but also changes the rules of the DeFi movement.

4. Stability Amidst Volatility

Dai stablecoin provides stability in the volatile cryptocurrency world. Dai is pegged to the US dollar and backed by a large amount of collateral locked in Maker Vaults. When the market is highly volatile, Dai allows users to store their value while retaining the potential of the crypto space.

5. Convenient, Fast, Low-Cost Remittances

As a stable exchange medium, Dai can be used to repay debts, conduct cross-border transactions, and pay for goods and services. Cross-border remittances using traditional financial services are expensive and time-consuming. For example, currently, Bank of America charges approximately $45 for a USD international wire transfer from the US, while Western Union charges $9 to send $1,000 from the US to Argentina. In contrast, as the Maker protocol is built on the blockchain, users can transfer Dai globally in seconds in a peer-to-peer manner, with costs only a fraction of traditional methods (users only need to pay gas fees).

6. Always-On Service

Traditional financial service companies operate on fixed schedules. This means that while users can go to the bank over the weekend (for example, depositing and withdrawing cash using ATMs, or using mobile apps to deposit checks and transfer funds), their transactions will settle on the next business day.

However, Dai is available to users 24/7 because it is built on the blockchain and is decentralized. Whether a user wants to generate Dai or simply make a payment with Dai, they can do so at their own time, at any time and place in the world.

7. Convenient Entry and Exit Channels

Through multiple regulated platforms, it is easy to exchange Dai for fiat currencies. For example, Coinbase and its trading platform Coinbase Pro offer functions to purchase Dai with fiat currency and sell Dai for fiat currency. Remittance service Wyre is another effective way for entry and exit of Dai stablecoin assets.

8. Transparency Beyond Traditional Financial Systems

The decentralized Maker protocol provides users with a macro and micro understanding of how Dai and DSR work. Blockchain technology has built-in checks and balances because all transactions are shared on a public ledger, visible to anyone. Additionally, technically savvy users can view Maker's audited and formally verified smart contracts to understand the workings of these financial technologies at a granular level. People can never expect such high transparency in the traditional financial world.

9. Aiding Ecosystem and DeFi Development

The usage of Dai is increasing. As more projects integrate Dai, such as DSR, more people are using stablecoins, and the Maker ecosystem continues to grow. Dai enables developers to provide their users with the ability to trade using stable assets, attracting more risk-averse participants. The growing number of developers and Dai users bring a network effect to the Maker protocol, enhancing the stability of the ecosystem.

Dai stablecoin is a key component of the DeFi movement, serving as a store of value, trading asset, passive income source, and measure of collateral in Maker Vaults. As more people see the benefits of secure, open, permissionless systems, this movement will continue to grow.

The Maker ecosystem includes dapps created by the community and the Maker Foundation.

10. Other Blockchain-Based Advantages

Dai also offers advantages to specific users. For example, the use of Dai by blockchain-based gamers is increasing. In June 2019, Maker partnered with Axie Infinity, Inc. to introduce Dai as the in-game currency for their blockchain game in the digital pet world. Less than a year later, in March 2020, the Maker Foundation launched the Dai Gaming initiative, aiming to help Dai become a key part of the global economy. Dai is also frequently used in disaster relief efforts, providing stable funds quickly and conveniently to those in need of assistance.

The benefits of stablecoins are tangible

Conclusion

Cryptocurrencies and blockchain technology offer an efficient, trustless way to transact, save, and conduct business without interference from third parties. The above use cases for the Dai stablecoin enable individuals and businesses to enjoy the advantages of digital currencies. In addition to the advantages over traditional financial markets, stablecoins have also had some impact on the native cryptocurrency market. We can see stablecoins and fiat currencies eroding the market share of existing BTC trading pairs. The issuance of stablecoins and over-the-counter premiums have become important indicators for judging the trends in the cryptocurrency market. Perhaps in the next bull market, stablecoins will occupy two to three of the top ten spots in cryptocurrency market capitalization while dominating the traditional financial services market.

This article is reproduced with permission from ChainNews, source: ChainNews (ID: chainnewscom)

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