Collateral and Risk
Learn about risks to the Dai Credit System
MakerDAO is an Ethereum-based DAO that operates the Dai Credit System, a permissionless loan facility.
The Dai Credit System issues the cryptocurrency Dai, a stablecoin designed to track $1 USD with low volatility. Dai's stability dependends on a system of carefully crafted incentives.
Collateral can be retrieved upon repayment of the outstanding Dai amount plus an associated Stability Fee.
This architecture poses two pressing concerns:
1. Where does Dai source its value?
2. What compels it to remain pegged to USD?
The answers to these two questions are the focal points of most risk analysis surrounding Dai.