Dai (DAI) is a cryptocurrency with a market capitalization of more than 9 billion CAD. It’s a stablecoin that maintains a value of 1 DAI equals 1 USD (~1.2 CAD). As a price-stable cryptocurrency, people can take part in blockchain transactions without worrying much about volatility.
For cryptocurrencies to be useful in real-world transactions, they should first be price stable. For example, we want to be paying for goods and services for roughly the same amount for a year. If price always drastically changes (such as what happens in Bitcoin, Ethereum, and most other popular cryptocurrencies), how much we pay for goods and services becomes unpredictable.
Dai (DAI) and other stablecoins provide some predictability and stability. As a result, they have become useful in paying for goods as well as transferring funds and assets. In addition, many developers and investors have adopted Dai (DAI) because of this cryptocurrency’s price stability (fewer worries about its value going down suddenly).
Although Dai (DAI) can be useful in paying for goods and services, what we’re most interested in is if investing in DAI will bring us profits. We might not actually use DAI to pay for goods and services or directly participate in blockchain-based transactions. For everyday investors, it’s about buying some DAI, waiting for its price to go up, and taking the profits.
Is DAI a good investment? To help you decide, here are what many other investors think about this stablecoin (DAI’s pros and cons):
In blockchain-based transactions, DAI has been used across the Ethereum network in the following ways:
Notice that DAI is like conventional money on how DAI is used to hold and transfer assets (including borrowing). It even has a passive income feature where users can put their idle DAI tokens to earn variable interest income (there’s a lockup period to earn interest). Another option is when users deposit their tokens into a MakerDAO smart contract (MakerDAO is the organization or protocol behind DAI). Users can automatically earn interest income according to the programmed smart contract.
With this passive income feature and DAI’s utility for asset transfers, many developers and backers continue to support DAI and MakerDAO. As a result, DAI continues to have billions of dollars of market capitalization and an estimated 24-hour trading volume of hundreds of millions of dollars. With this high level of financial activity, DAI remains to be an active player in the cryptocurrency market.
As you look for other cryptocurrencies where you can invest your money, you’ll most likely come across Tether (USDT) as the most reasonable alternative. Both USDT and DAI are stablecoins (price-stable cryptocurrencies). There are several technical differences between them, but one key difference that investors note is that Tether (USDT) has the largest market capitalization among the stablecoins.
Tether is almost 10x bigger than Dai in terms of market cap. Also, Tether (USDT) is just behind the crypto giants (Bitcoin and Ethereum). As a result, Tether is widely popular and most likely available in many crypto trading platforms. In other words, it’s easy to find a platform where you can buy Tether (it’s always available in major crypto exchanges). On the other hand, in other platforms you might have to double check whether DAI is indeed available.
Both Dai (DAI) and Tether (USDT) are stablecoins. They maintain their value at around 1 USD (~ 1.2 CAD). They let you hold your crypto assets for a while and you won’t have to worry about your assets suddenly losing value. There are still risks though (built-in in the crypto market). For example, although TerraUSD was a stablecoin, it rapidly lost most of its value just this May 2022. This places doubts on whether stablecoins are indeed safe investments. Because of this recent incident, investors now think twice before putting their money in stablecoins.
Despite the risks, many investors still want to try investing in DAI and other cryptocurrencies. They’re already aware of what might happen (including worst case scenarios). Also, it’s likely that they have spread their risks or limited their losses.
But for us general investors and users, why would we buy Dai (DAI) in the first place? Why not just use the Canadian dollar, our local currency, to pay for goods and carry out other transactions?
Often, DAI is used to hold assets in the blockchain. For example, you earned some profits from your Bitcoin investment. You want to take a rest for a week but you still want your assets to remain in the blockchain (because it’s decentralized and no third party can suddenly take it away).
One way to accomplish that is by converting your Bitcoin into DAI so that your assets will maintain their value. In contrast, if you leave your funds in Bitcoin, its price might suddenly drop tomorrow and you lose your profits.
If you want to start your crypto investing journey and you want to minimize your risk, here’s what you can do:
You can start for as little as 50 CAD. With this low starting amount, even if something goes wrong your losses will be minimal. And if you buy a stablecoin, you further lower the risks. As you get more comfortable, you can explore other cryptocurrencies.
If you want to learn more about other cryptocurrencies, you can visit this crypto list with each coin’s pros and cons. This way, you can better decide on which ones to choose as you learn more about different cryptocurrencies.