DAI stablecoin launched as a result of the need to create a cryptocurrency with a stable value independent from the traditional market. The guide provides details on its functioning and use cases.DAI is a stablecoin crypto-asset that keeps a 1:1 value with the US Dollar through an automated system of smart contracts on the Ethereum (ETH) blockchain. DAI is the world’s first stablecoin that launched on Ethereum. MakerDAO, a non-profit foundation that focuses on bringing stability to the cryptocurrency economy, maintains and regulates it.Creation and Issuance of DAI StablecoinThe initial development of DAI started in 2015 by Rune Christensen. Before entering the world of crypto, he founded a business that recruited Westerners to teach English in China. After discovering Bitcoin in 2011, he eventually sold the business to invest in the asset. However, when Mt. Gox collapsed in 2014, Christensen turned to the idea of stablecoins. This is how MakerDAO appeared.DAI coin officially launched in 2017 as a product of MakerDAO, with its smart contracts on the Ethereum blockchain. Unlike other asset-backed cryptocurrencies, no central organization controls DAI. Such is the case with Tether (USDT), which is run by Tether Holdings. Instead, users submit ETH or ERC-20 tokens into a smart contract that uses these assets as collateral.There is neither a central organization behind DAI nor a financial entity that determines its value. DAI is the most decentralized stablecoin and the best option for traders besides USDT. Only the market regulates its price. DAI is backed by Ether but does not lose value when ETH experiences price drops, withstanding market fluctuation.DAI’s structure is similar to that of a cooperative entity. It is the only stablecoin generated by its users through a collateral deposit on MakerDAO, making its value stable.DAI’s Underlying TechnologyDAI is the product of open-source software called MakerDAO, a decentralized autonomous organization that runs on Ethereum’s Layer 2. This protocol allows lenders to lock up their funds in ETH or any other crypto asset through smart contracts on Ethereum, guaranteeing the issuance of new DAI tokens in the form of loans.Maker laid the foundations for DeFi and is the leading project in terms of managed assets. To give an idea, when the total market capitalization of the DeFi market reached $1 billion, Maker accounted for over 60% of that number.MakerDAO has a community-governance system, where holders participate in the changes of the protocol using MKR governance tokens. These tokens act similarly to stocks, as MKR holders can vote and decide on the changes regarding the development of MakerDAO and DAI. Holders with large amounts of MKR have a stronger voting weight and, as a result, a greater influence.Notably, DAI has all the properties of a currency. In contrast to other crypto assets, it minimizes price volatility. Anyone can send and receive DAI without the need for third parties, in a peer-to-peer (P2P) method. Many traders use it to back their profits once they exit the market, the same way you would exchange your Ethereum (ETH), Binance Coin (BNB), or Bitcoin (BTC) for Tether (USDT) or USD Coin (USDC).To acquire DAI, you could either spend ETH to buy the equivalent dollar amount in DAI on a crypto exchange or collateralize ETH and other tokens using the Maker protocol. Maker provides Collateralized Debt Positions (CDPs), which are smart contracts that you can leverage to lock your collateral and generate DAI.You can view these smart contracts as safe vaults to store your funds. DAI is usually overcollateralized to compensate for the volatility of the cryptocurrency. In other words, the required deposit is greater than the value of the token.Use Cases of DAI StablecoinDAI stablecoin has a number of use cases. The most important ones include inflation protection and savings, gaming, digital art, and e-commerce.Inflation protection and savingsStablecoins like DAI appeared as an alternative for many savers and investors. It offers traders a powerful tool to avoid the inherent volatility of cryptocurrencies whose prices depend the global crypto market.Capital controls are natural triggers for activity in the crypto market. This is the reason why DAI became one of the most used stablecoins, especially in countries that experience hyperinflation periods. DAI is one of the most popular options for traders that serves as a backup asset.Maker Dao introduced Dai into the gaming world, through an initiative that could help expand the adoption of blockchain and crypto. This movement plans to merge cryptocurrencies and gaming, allowing the use of decentralized assets and providing more user engagement. As programmable money, Dai does not devalue, unlike many other in-game currencies. Besides, it does not require a third party, so developers can create financial protocols in gaming platforms without needing an intermediary.By being a borderless currency that anyone can easily transfer and store, many gamers in the industry are comfortable with using digital assets, and Dai is one of the most popular options at the moment.Further, DAI is very popular within non-fungible tokens (NFTs) marketplaces as a medium of exchange due to its stable value and easy global transfer. DAI has sparked the interest of DeFi marketplaces due to its transparent and secure nature. To name a few, Rarible, OpenSean, and Foundation support the stablecoin.DAI also has a role in the e-commerce world. Coinbase Commerce, a blockchain-based liquidity market, facilitates companies to accept DAI and other cryptos. Over 8,000 stores have already accepted DAI as a payment method. Users can also choose to spend DAI online and in physical stores using DAI-powered debit cards linked to Visa and Mastercard networks.ConclusionA team of programmers behind DAI identified the need to create a cryptocurrency with a stable value independent from the traditional market. Besides, they wanted to unite the best properties of Bitcoin in one protocol. They managed to develop crypto that is decentralized, resistant to censorship, and trustworthy.With DAI, users find a valuable vehicle to protect their savings without worrying about volatility and incurring in illegal operations. However, DAI stablecoin uses Ethereum, and the increasingly high fees and network scalability naturally affect DAI transactions.The stablecoin is perfectly interchangeable for other cryptos such as Bitcoin, Ethereum, Litecoin. By purchasing DAI, the client will be able to exchange it for another cryptocurrency without having to wait for third parties and without risking volatility.