Dai

dai
Rank #20•Stablecoins, Decentralized Finance (DeFi), USD Stablecoin
CoinYQ Dossier

DAI kept its name while the balance sheet changed underneath it

Dai began as a wager that overcollateralized ETH could support a dollar-like token without a bank. Seven years later the same symbol sat beside USDS, stablecoin reserves and real-world assets. Its history is the record of each new defense becoming a new dependency.

Maker began with one kind of collateral

Maker's official white paper traces active development to 2015 and the first formal Dai design to December 2017. The system did not depend on cash held in a single bank account. It issued a debt unit against collateral under programmable rules.

The original Dai system reached Ethereum with ETH as its only collateral. Users locked ETH and generated Dai; after a successor appeared, the system became known as Single-Collateral Dai and its token as Sai. The launch showed that the mechanism could work, but concentrated every collateral shock in one volatile asset.

Multi-Collateral Dai turned one asset into a governed portfolio

On November 18, 2019, Multi-Collateral Dai launched with new collateral types and the Dai Savings Rate. The old single-collateral token became Sai; the new token kept the DAI symbol. Migration changed both contract addresses and risk architecture.

The decisive change was political as well as technical. Governance could admit or remove collateral and set each liquidation ratio, debt ceiling, stability fee and oracle path. Diversification could reduce dependence on ETH, but every admitted asset also imported its own contract, market, issuer or legal failure mode.

Black Thursday found the gap between collateral and execution

On 2020-03-12, a severe market fall and Ethereum congestion began a loss period in which oracle updates sometimes failed and keepers faced gas costs and scarce DAI liquidity. Many auctions settled at zero or far below market value, leaving protocol bad debt.

The system was designed with excess collateral, yet execution failed at several links at once. Uncovered debt remained after collateral disappeared, and the protocol used its debt-auction mechanism to mint and sell MKR for DAI. The lesson was causal: a collateral ratio cannot bid in an auction, pay gas or repair a delayed price feed.

CoinYQ’s published Black Thursday story follows those auctions in detail. Here the event marks the moment Dai’s design had to account for operational liquidity and bidder diversity, not merely collateral value.

USDC steadied the price and moved the risk boundary

Governance added USDC collateral during the 2020 response period and later approved a Peg Stability Module. The December proposal specified a 500 million DAI ceiling and conversion fees. Direct stablecoin inventory gave arbitrageurs a shorter route when DAI traded away from its target.

The route was effective precisely because USDC depended on an issuer and bank reserves. DAI’s balance sheet was no longer an isolated pool of crypto collateral. It could inherit freezing, custody, banking and peg risk from the centralized asset used to stabilize it.

The 2023 depeg made the imported risk visible

USDC lost its dollar peg in March 2023 after Circle disclosed that $3.3 billion of reserves were exposed to Silicon Valley Bank. Maker treated USDC-linked collateral and PSM inventory as risks. A March 11 emergency executive proposed cutting several USDC-linked ceilings to zero, reducing the PSM-USDC-A gap from 950 million to 250 million DAI, raising its input fee from 0% to 1% and shortening the governance delay from 48 to 16 hours; the spell executed on March 13.

A March 20 governance poll then asked voters to rank reserve diversification against retaining USDC as the primary reserve. The sequence showed that the PSM could import the failure mode of the centralized asset used to stabilize DAI.

Sky added a second stablecoin without deleting the first

September 2024 Launch Season introduced USDS, sUSDS, SKY and converters. DAI remained live. The official DaiUsds contract is a permissionless convenience layer: it uses the DAI and USDS join adapters to exchange the two ERC-20 tokens in both directions at 1:1.

Shared issuance accounting does not make the token contracts interchangeable in every context. USDS is upgradeable; legacy DAI has its established contract and integrations. Savings wrappers add another layer: sDAI and sUSDS accrued different exchange rates and are not 1:1 with each other. Migration is a route, not a declaration that every balance has the same rights.

A DAI balance transfers value but does not select collateral or cast votes

A holder controls an ERC-20 balance, transfers and permit approvals. That balance does not identify a particular collateral position or give the holder control over a Vault, PSM reserve or real-world-asset structure. Holding DAI also does not create voting power.

On 2025-05-19, the governance cutover made SKY the sole voting token and moved live voting to Chief V3. SKY governance selects executable code and can change fees, ceilings, collateral and oracle paths through Pause and Spell contracts. Current documentation marks Global Settlement and Emergency Shutdown disabled and deprecated. The older shutdown design settled against collateral under system conditions and was never an instant fiat-dollar promise.

How the project changed

  1. 2015
    Maker development begins

    The updated white paper traces active development of the original Dai system to 2015.

  2. 2017-12
    The original Dai white paper is published

    The formal white paper introduces the ETH-only Dai system later known as Single-Collateral Dai and its token as Sai.

  3. 2019-11-18
    Multi-Collateral Dai replaces the first system

    The new DAI adds governance-approved collateral and the Dai Savings Rate; the old token becomes Sai.

  4. 2020-03-12
    Black Thursday breaks auction execution

    Congestion, oracle delays, keeper failure and scarce DAI allow zero and underpriced bids, leaving bad debt.

  5. 2020-12
    Governance approves USDC PSM parameters

    A direct stablecoin route begins with a 500 million DAI debt ceiling and governance-set fees.

  6. 2023-03-11 to 2023-03-13
    The USDC depeg prompts an emergency spell

    The March 11 proposal reduces USDC-linked ceilings and throughput, raises the PSM input fee and shortens the governance delay; the spell executes on March 13.

  7. 2024-09
    Sky Launch Season introduces USDS

    DAI stays live while a bidirectional 1:1 DAI–USDS conversion path joins the system.

  8. 2025-05-19
    SKY governance takes over live voting

    The cutover makes SKY the sole voting token in Chief V3; MKR no longer casts protocol votes.

Evidence and primary sources

Last evidence review: 2026-09-05

More stories about this project

Black Thursday: How Zero-DAI Auctions Exposed MakerDAO’s Liquidation Design

The 2020 crash revealed how an on-chain auction could still depend on timely oracle updates, available DAI and competing keepers.

Read story →

What is Dai?

DAI is the legacy user-facing stablecoin of the credit system now called Sky Protocol. Its Ethereum contract at 0x6B175474E89094C44Da98b954EedeAC495271d0F records a variable-supply ERC-20 balance with transfer and signature-based permit functions. New DAI is created when authorized join modules turn the protocol’s internal debt accounting into external tokens, and it is burned when that path is reversed.

The system seeks a market value near one U.S. dollar. Vault debt backed by approved collateral, liquidations, stablecoin conversion modules, savings demand and market arbitrage pull the price toward that target. Those mechanisms do not create an insured deposit or a universal right to exchange one DAI for one dollar from an issuer.

What problem does Dai solve?

The central problem is how to issue a useful dollar-denominated asset without relying on one bank account or requiring every transfer to pass through a company. Dai began by making borrowers lock more ETH than the DAI they generated. That design moved trust into collateral prices, oracles, liquidators, auction bidders and governance.

Expansion solved some weaknesses and imported others. Multi-Collateral Dai could diversify beyond ETH, but stablecoin PSMs brought issuer and bank risk, while real-world-asset structures brought legal, custody and valuation dependencies. Sky then introduced USDS without deleting DAI. Users now need to distinguish one shared accounting system from several token contracts and savings wrappers.

How does Dai work?

A borrower opens a permitted Vault, locks collateral and generates DAI debt below a governance-set ceiling. Each collateral type has its own liquidation ratio, stability fee, oracle path and debt limit. If collateral value falls too far, liquidation sells it to cancel debt; if the system accumulates uncovered debt, governance can use surplus and recapitalization mechanisms. MKR historically absorbed dilution risk, while current executable control is exercised through SKY governance contracts.

Peg Stability Modules exchange DAI or USDS against approved centralized stablecoins under governance-set fees, ceilings and rate limits. They can deepen liquidity near one dollar, but their inventories inherit the freeze, custody, banking and depeg risks of those assets. The March 2023 USDC shock showed that a module designed to defend the peg can also transmit another stablecoin’s failure.

Since the September 2024 Sky launch, DAI and USDS have remained separate ERC-20 tokens linked to the same issuance source. A permissionless converter moves between them in both directions at 1:1 with no liquidity restriction in the documented route. This does not make every wrapper identical: sDAI and sUSDS represent savings positions with different accumulated exchange rates and do not convert 1:1 to each other. Holding plain DAI does not itself create a fixed yield.

A DAI holder can transfer tokens and authorize spending, including through permit. A DAI balance does not identify a particular Vault’s collateral, PSM reserve or real-world-asset position, and it grants no control over those positions. DAI ownership alone does not provide a protocol vote. On 2025-05-19, the governance cutover replaced MKR and the old Chief with SKY and Chief V3 for current onchain voting. SKY governance can change collateral lists, fees, ceilings, oracle arrangements, delays and implementations through voted spells. Current documentation marks Global Settlement and Emergency Shutdown disabled and deprecated; the older shutdown design was a conditional collateral-settlement process, not ordinary fiat redemption.

Key facts

  • DAI’s Ethereum address is 0x6B175474E89094C44Da98b954EedeAC495271d0F; it has 18 decimals and variable supply.
  • Maker's active development began in 2015; the original ETH-only Dai system was introduced in December 2017.
  • Multi-Collateral Dai launched on 2019-11-18, renamed the earlier token Sai and introduced additional collateral plus the Dai Savings Rate.
  • Every collateral type has governance-set liquidation ratios, stability fees, debt ceilings and oracle arrangements.
  • During the loss window beginning on 2020-03-12, congestion, failed oracle updates, keeper trouble and scarce DAI liquidity let many auctions settle at zero or far below market value and left protocol bad debt.
  • The December 2020 USDC PSM proposal started with a 500 million DAI debt ceiling and explicit conversion fees.
  • A March 11, 2023 emergency executive proposed cutting the PSM-USDC-A gap from 950 million to 250 million DAI, raising its input fee from 0% to 1% and shortening the governance delay from 48 to 16 hours; the spell executed on March 13.
  • September 2024 Sky Launch Season introduced USDS while leaving DAI available.
  • On 2025-05-19, the governance cutover made SKY the sole voting token in the live Chief V3; MKR can no longer vote.
  • The documented DAI–USDS converter is permissionless, bidirectional and 1:1.
  • sDAI and sUSDS are savings wrappers with different face values; they are not 1:1 with each other.
  • Plain DAI ownership grants transfer and permit rights, not SKY voting power or ownership of protocol collateral.
  • DAI targets one dollar through risk-managed mechanisms; no reviewed source promises universal, unconditional fiat redemption at one dollar.

Official links

Official websiteWhitepaperBlock explorerX / TwitterRedditGitHub

Categories

StablecoinsDecentralized Finance (DeFi)USD StablecoinEthereum EcosystemCrypto-backed StablecoinFiat-backed Stablecoin

Related coins

Tether#3USDC#5USDS#11Ethena USDe#24Global Dollar#26USD1#26

Frequently asked questions

Is DAI still active after Maker became Sky?

Yes. DAI remains a separate Ethereum token and the current protocol routes include it. Sky introduced USDS as an upgraded stablecoin rather than erasing DAI.

Are DAI and USDS the same token?

No. They are distinct ERC-20 contracts tied to the same issuance source. The official converter exchanges them in both directions at 1:1.

Can sDAI be exchanged 1:1 for sUSDS?

No. They are separate savings wrappers whose share values accumulated under different rates and launch dates. Convert the underlying assets through the documented routes instead of assuming wrapper parity.

Is every DAI backed only by overcollateralized ETH?

No. That described the 2017 Single-Collateral system. Later governance added crypto assets, centralized stablecoin modules and real-world-asset structures with different collateralization, custody and legal risks.

Can DAI lose its dollar peg?

Yes. Liquidation failure, bad oracle data, congestion, weak market liquidity, collateral loss or a PSM reserve depeg can move its market price away from one dollar.

Can I redeem one DAI for one dollar from Maker or Sky?

The reviewed protocol routes and front-end terms provide no ordinary issuer-to-holder fiat-dollar redemption. Vault repayment, market sale, PSM conversion and DAI–USDS conversion are distinct routes. The older Emergency Shutdown collateral-settlement design is currently disabled and deprecated.

Does holding DAI give governance votes?

No. DAI provides token transfer and permit rights. Current protocol voting uses SKY in Chief V3 following the 2025-05-19 governance cutover; MKR can no longer vote.

What did Black Thursday change?

It proved that excess collateral ratios were insufficient when Ethereum congestion, oracle delays, DAI scarcity and keeper failure occurred together. The protocol incurred bad debt, recapitalized through MKR debt auctions and later changed liquidation and peg-liquidity architecture.

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