The Dai (DAI) token joins Bitcoin, XRP, Ether, Litecoin, Waves and Wollo as the seventh cryptocurrency available for users in the EEA to buy, store, convert and spend with their Wirex Visa cards. As our very first stablecoin, its introduction marks the start of a new era for Wirex.
Stablecoins offer a much sought-after middle ground between the decentralised nature of cryptocurrencies and the relative market stability of traditional money.
Here’s a quick rundown of stablecoin basics:
- They combine the stability of traditional currency with cryptocurrency’s ease of circulation
- They are set up with a reserve of stable assets which can be used to redeem the tokens (e.g. 1 token = 1 USD)
- They can be used for payments, savings or as a tool for investors to store their crypto on exchanges that don’t support traditional currencies
Click here to find out more about stablecoins.
The creation of DAI
Rune Christensen launched a decentralised app called ‘Maker’, on the Ethereum blockchain in 2014. The Dai stablecoin was the Maker platform’s first innovation. Speaking to the Stable Report podcast, Christensen revealed that the token was originally intended to serve the Chinese market as a tool for liquidity or risk assessment, hence the name Dai – which means ‘lend’ or ‘provide for a loan’ in Cantonese. The token’s popularity has since spread beyond the Chinese market and MakerDAO now operates seven offices around the world.
Christensen believes that Dai “has the potential to become the first currency in the world that is immune to hyperinflation and hyperdeflation.” This is due to the way in which the coin is backed. Although its value is pegged to the US dollar (ensuring that 1 Dai token always equals 1 USD), Dai is backed by Maker (MKR) and Ether (ETH) tokens and stabilised by a smart contract. This architecture makes it one of the first tokens of its kind.
Dai offers a novel solution to the market volatility that characterises crypto without compromising on decentralisation – which is why they’re an excellent partner for Wirex. Here are a few other advantages of DAI:
Not only are all DAI transactions recorded on the blockchain, Maker also records and uploads development meetings onto SoundCloud, giving users an insight into their vision for the product.
As part of the algorithmic stabilisation, Dai is also backed up by two currencies – Maker (MKR) and Ether (ETH). If ETH crashes, MKR tokens can be “liquidated on the open market”. In other words, MKR can be cashed out to ensure that DAI tokens can be redeemed. Reportedly, roughly 1 million ether (about 1% of the total Ethereum supply) is locked in MakerDAO smart contracts.
- Smart contract mechanics
If the price of DAI rises above the US dollar, more DAI tokens are created automatically to bring the price down. If its price falls, tokens are sold to balance the value.
When Dai met Wirex
Wirex co-founder Pavel Matveev is delighted to welcome Wirex’s first stablecoin. “We want to give our customers access to a full array of cryptocurrencies. Stablecoins are yet another variation of crypto that demonstrates how easily and efficiently it can be integrated into everyday life.”
“Dai is an excellent tool to make international payments at low costs without the volatility,” expands his Wirex co-founder, Dmitry Lazarichev. “The token feeds into our ethos of enabling mainstream crypto adoption by streamlining traditional and cryptocurrencies. Dai is a solid addition to our existing cryptocurrency portfolio.”