Connect with us
[headerads]

Altcoins

How Does it Work: Stablecoin Dai and Ethereum’s Maker DAO

Published

on

stablecoin
READ LATER - DOWNLOAD THIS POST AS PDF

The volatility of cryptocurrencies has been one of the crypto trend’s largest problems, and it is still nowhere near being solved for the vast majority of them. However, as an attempt to combat this issue, researchers came up with a concept of stablecoins — cryptocurrencies that would be backed with real-world assets (fiat currencies, gold, etc.), or by other means, such as control of circulating supply or being backed by other coins.

However, most stablecoins were considered to be shady, and not real cryptocurrencies, as methods of controlling their prices often had a certain level of centralization accompanying them. This changed when the crypto winter struck, and investors needed an alternative that would protect them from dropping prices.

Tether (USDT) emerged as the most popular stablecoin, which is a title that it still holds to this day. However, Tether has had a number of controversies which caused many to lose trust in it and turn to alternatives to this alternative.

This is where Ethereum’s Maker DAO and a stablecoin Dai come in.

Maker and Dai

Dai is a popular stablecoin, backed by ETH coins which are locked within a smart contract. It is currently ranked as 59th largest cryptocurrency by market cap, but even so, it has been a topic of many discussions lately,

Dai coins are created within a network known as Maker DAO, which is a decentralized autonomous organization within the Ethereum ecosystem. Maker has become well-known for its ability to create dais, cryptocurrency-backed stablecoins. It uses the SCD (Single-Collateral Dai) system to allow pretty much anyone to store their ETH coins and create a stablecoin with a value of $1 per coin.

The system has become quite popular since the start of the crypto winter, and some estimates claim that around 1% of Ethereum’s entire circulating supply is currently locked up within the Maker system. The Maker and Dai share pretty much the same community, one that has been quite small, but it is slowly expanding.

What makes Dai different than other stablecoins?

As mentioned, there are several types of stablecoins, most of which are considered ‘traditional’ stablecoins, as they are backed by fiat currencies, such as the USD. Tether is one of them, but so is USD Coin (USDC), as well as Gemini Dollar (GUSD). These are coins created and backed by companies, such as Tether and Gemini, which keeps them centralized, which does not lie well with crypto purists.

Dai, on the other hand, is backed by another cryptocurrency — Ethereum. It has no central authority, and it only has its price thanks to the fact that Ethereum itself has value. In other words, ETH acts as collateral for DAI. The system that allows the creation of Dai also uses a method called overcollateralization (OC) to reduce risks and ensure that Dai will keep its value, even if Ethereum’s price drops. This requires the ratio of ETH collateral necessary to acquire Dai to be fixed at 1.5:1 all the time.

Maker and Dai face criticism

While this system seems to be working, as Dai is still quite popular for such a low-ranked coin (its daily trading volume is at $30.5 million), there are many who criticize it, claiming that the project will fail. They often compare it to the first DAO that Ethereum network had, which lost $50 million in mid-2016.

This happened because some users exploited the DAO’s code, which allowed them to take a large portion of its funds. Others claim that OC is a scheme and that neither the system nor the stablecoin should be trusted. Skeptics also believe that the regulators will crack down on Dai sooner or later and that this project will fail as well.

However, while there are clearly some concerns, the Maker Dao system continues to create new Dai tokens in exchange for the appropriate amount of ETH, and the system appears to be working. The project even hopes to expand the list of possible collaterals in the future, going beyond Ethereum itself.

Not only that, but there was also speculation that other cryptocurrencies might try to create their own version of Maker and Dai, such as Bitcoin Cash. However, this is all still nothing more than speculation, although it might be worth noting that this could be one potential path crypto might travel in the future in hopes of reaching stability.

For the latest cryptocurrency news, join our Telegram!

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

Image courtesy of Pexels

Altcoins

Is there a Real Value to Binance Coin (BNB)?

Published

on

Binance Coin
READ LATER - DOWNLOAD THIS POST AS PDF

Binance Coin (BNB) is one of the most interesting cryptocurrencies at the market right now. The coin was developed by the largest crypto exchange by trading volume in the world, and it only works within the exchange’s ecosystem. However, it still managed to achieve what many believed was impossible — it stopped following Bitcoin’s lead, and it started carving its own path.

At the very least, the coin is highly intriguing, but does it hold real value? This is a question that many in the crypto community have been asking for a while now, uncertain whether BNB is a worthy investment or not.

What gives BNB its value?

Binance Coin cannot be used for purchasing goods and services, like Bitcoin. It currently does not fuel a development platform like Ethereum. It cannot even be used as XRP for sending international payments. However, the coin had still managed to triple its price in the last three months and to surge when most other cryptocurrencies were seeing losses due to the last remnants of the crypto winter.

BNB managed to achieve all of this because of its use cases within Binance, but also because of its future potential. First of all, Binance is the largest crypto exchange in the world, with millions of customers, most of which use the exchange on a daily basis.

This means that the exchange inspires…

Continue Reading

Altcoins

Top 3 Reasons To HODL Binance Coin (BNB)

Published

on

Binance Coin
READ LATER - DOWNLOAD THIS POST AS PDF

After 2018 crypto winter began, everyone involved with cryptocurrencies experienced quite a difficult period. The prices were down, weak projects started failing, and even the strong ones appeared to be in more trouble than they could face. The year was especially difficult for HODLers, as they expected that the coins’ prices would continue to skyrocket. Instead, they lost a fortune, not even knowing if the prices will ever start returning to their former heights.

These days, things do not seem so bad anymore. The prices are still down, most of the coins are still at their newly-found bottoms, but smaller bull runs are improving the situation, while a massive one still remains somewhere in the future, at least according to optimists.

However, among the coins in the vast and diverse crypto market, one token stands out. Binance Coin is not exactly a typical cryptocurrency, and for many reasons. The biggest one is that it is one of the few tokens out there that does not follow Bitcoin’s lead, at least not anymore. Whether that will change in the future remains to be seen, but for now, BNB appears to be going its own way, carving its own path through the crypto market.

Its price has increased by several hundred percents since the year began, and for now, it continues to grow. As such, it is perhaps more worthy…

Continue Reading

Altcoins

Why Binance Could Become The First Centralized Company To Achieve Total Decentralization

Published

on

Binance DEX
READ LATER - DOWNLOAD THIS POST AS PDF

At this point, pretty much everyone who knows anything about cryptocurrencies knows that they are based on the concept of decentralization. The same is true for the blockchain technology. While there are some exceptions, such as certain stablecoins, most digital coins follow this principle.

This means that these coins, as well as their network, have no central authority, no single entity that would make choices and decisions that would impact others. However, while most coins managed to achieve this through different complex mechanisms and algorithms — one aspect of crypto trading still remains heavily centralized. We are, of course, talking about crypto exchanges.

Centralization of crypto exchanges

Most of the largest crypto exchanges out there are designed as companies, rather than community-operated platforms. The exchanges have their employees who designed them and developed special tools. They act as customer support, developers, innovators, and alike.

They also get to decide which coins will be listed and which are too weak, uncertain, or not fit to be found on the list. Exchanges are also responsible for keeping the traders’ and investors’ funds safe, which is why they typically develop their own wallets. As such, they are often targeted by hackers, as the coins are stored in an exchange wallet, waiting to be withdrawn, sold, or converted into different currencies.

This makes them extremely unsafe, and investors and traders are always…

Continue Reading

Elite