Decentralised finance, or “DeFi”, is on a roll with the launch of several products and many more to come. The concept is to build traditional financial tools on a public blockchain, taking out intermediaries in the process.
One of the most prominent examples is MakerDAO, a “decentralised autonomous organization” promoting the decentralised stable token “DAI”. Similar to the controversial USDT, DAI is pegged to the USD but collateralised by ETH (1 DAI = ETH worth 1 USD), giving holders of ETH the possibility of exchanging ETH for DAI and foregoing the volatility of the (locked up) digital asset. This is practical in two ways: first, users of ETH can transact in a practical and stable way; and, second, the long-term stability of DAI against the USD enables crucial financial functions such as loans and credit.
Amongst other DeFi projects are: Augur, Dharma, and Compound.
DAI vs. USD
Source: MV Index Solutions.
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