DAI is a fully collateralized stablecoin created and regulated by Maker DAO (Decentralised Autonomous Organisation), founded by Rune Christensen, the current CEO. DAI seeks to solve the volatility of cryptocurrencies by keeping its value soft-pegged to one U.S. dollar.
Are you looking to buy DAI but don’t know where to start? So read on to learn everything you need to know about the DAI cryptocurrency and find out how you can buy DAI in a few simple steps.
Let’s get right to it!
What Is DAI
Dai is the first decentralized, collateral-backed stable cryptocurrency.
DAI is an ERC-20 token that attempts to maintain a stable 1:1 value with the U.S. dollar by locking other crypto assets in smart contracts. It’s the native token of the Maker Protocol – a decentralized autonomous ecosystem of smart contracts running on the Ethereum blockchain.
The DAI token is also the key to the MakerDAO lending system. Collateralized loans allow a lender to secure a loan by locking away the assets they own. When a loan is taken out on MakerDAO, DAI is created. Users borrow and pay back DAI, which functions simply as a stable Ethereum token used to pay for things.
How Does DAI Work
DAI is an Ethereum-based stablecoin that necessarily maintains a value of $1 at all times. This process is realized through an automated smart contracts system on the Ethereum blockchain. The DAI stablecoin price is indirectly pegged to the U.S. dollar and is collateralized by other cryptocurrencies.
DAI aims to reduce the volatility of trading on the blockchain by keeping the value of $1 since it’s soft-pegged to the dollar.
DAI operates through a decentralized autonomous organization (DAO), which makes it more appealing to cryptocurrency enthusiasts as decentralization is central to cryptocurrencies.
What Are Stablecoins
Stablecoins are cryptocurrencies that are pegged to the value of an underlying asset. The underlying asset can be commodities, such as gold, fiat currencies, or the U.S. Dollar. DAI is pegged to the value of the U.S. Dollar, which means one unit of DAI is equal to the exchange value of $1.
Popular Ethereum-hosted stablecoins include Tether (USDT), USD Coin (USDC), and Wrapped Bitcoin (WBTC).
DAI Is a Stablecoin With a Twist
Unlike other popular stablecoins issued and controlled by a central authority, DAI is a decentralized, collateral-backed stablecoin. And, in contrast to other stablecoins, which rely on a customer’s trust in their underlying asset deposits, Maker Protocol uses smart contracts to back the value of DAI with collateralized crypto deposits.
To generate DAI, users must deposit assets as collateral in the Maker Vaults on the protocol. The collateral deposited is always higher than the value of DAI generated as a loan. They withdraw their collateral after repaying the principal amount plus the stability fee. Other than DAI, MakerDAO has also issued a governance token called the MKR. MKR holders govern the Maker Protocol through executive voting and governance polling.
Why Buy DAI
Before helping you with your DAI purchase, let’s first look into a few factors that make DAI a good investment.
DAI Gives Stability
One of the most important reasons to buy DAI is, of course, stability. As discussed earlier, since DAI is a stablecoin, it maintains the value of USD. Moreover, holding DAI serves as a hedge against the price of the asset you deposit in the Maker Vaults. Since you get back your deposit after repaying the borrowed DAI, you can reduce the effects of the crypto market volatility.
For example, if you deposit $200 worth of Ethereum (ETH) as collateral for an equal amount of DAI and the price of the ETH skyrockets, you will still get your full ETH back regardless of its increased value. Additionally, if the price of the ETH falls, you can hold on to your borrowed DAI and return it to the vault only after the price of ETH stabilizes or increases in value.
Additionally, DAI gives financial stability to citizens of countries where the local currency is highly volatile.
DAI Provides Unrestricted Access to Funds
DAI is a fully-transparent, non-custodial stablecoin, which gives users unhindered access to their funds. Thanks to its smart contracts, transactions on DAI are self-executed. i.e., they don’t warrant permission from any central authority. Governments can restrict access to fiat currency by setting withdrawal and transactional limits, but DAI, on the other hand, empowers users with full control over their holdings.
Quick, Cheap, and Safe Transfers
Traditional money transfers can be tedious, expensive, and time-consuming. On the other hand, transferring DAI is instant, secure, and much more efficient.
Earn Income on Holdings
DAI lets holders generate income by locking their assets in smart contracts. The self-executing smart contract distributes the earned interest to holders as per the Dai Savings Rate (DSR). The DSR is an interest rate that MKR token holders determine through an executive vote. Sometimes DAI can deviate from the USD rate, and the value can increase or decrease by a few cents on some exchanges. This creates arbitrage opportunities for DAI holders, who can buy or sell DAI for a quick profit.
Where to Buy DAI
You can purchase DAI on several cryptocurrency exchanges. Visit the market page on CoinStats to view the exchange platforms supporting DAI. Compare the exchanges’ security, user experience, fee structure, supported coins, etc., to choose the one that has the characteristics you need, such as affordable transaction fees, an intuitive platform, round-the-clock customer service, etc. Also, consider whether the cryptocurrency exchange is regulated by the Financial Industry Regulatory Authority (FINRA), etc., and allows you to buy DAI using your preferred payment method.
Let’s look into some of the most poplar exchanges that support DAI.
Coinbase is the largest exchange in the US and the second-largest in the world by transaction volume, after Binance. The exchange has more than 98 million verified users in over 100 countries and maintains approximately $256 billion in assets. Coinbase allows you to trade more than 130 types of cryptocurrency.
The exchange famously went public and reached a valuation of over $100 billion in 2021. The “Coinbase Effect,” meaning the value of a crypto asset tends to rise exponentially within days after getting listed on the exchange, demonstrates Coinbase’s influence in the crypto industry.
Coinbase has gained popularity thanks to its impressive features and services. First and foremost, Coinbase has attracted beginners to the platform thanks to its robust security features and 24/7 customer support. Competitive fees, an easy-to-use platform, and international reach are some stellar features that help Coinbase get an edge over other cryptocurrency exchanges in the space.
Coinbase fees vary by country, with a 3.99% fee for debit and credit card purchases. Bank transfers with no deposit fees and a 1.49% fee on purchases are the best way to buy DAI on Coinbase.
Experienced traders, wanting to reduce their fees can use Coinbase’s “Pro” version, where rates start at 0.50% and decrease in proportion with trading volume.
Kraken is one of the largest and oldest exchanges and one of the few U.S. crypto exchange platforms to provide advanced trading tools like margin. Kraken has five main investment options: crypto assets, fiat assets, futures trading, margin trading, and over-the-counter (OTC) trading.
Kraken provides the DAI/USD, DAI/EUR, and DAI/USDT trading pairings for Dai, making it one of the few credible exchanges that allow users to purchase DAI using Euro.
Kraken’s fees start at 0.26% and drop as the trading volume increases. Consider that buying DAI on Kraken requires some trading experience and doesn’t have the same ease-of-use as on Coinbase.
Uniswap is one of the largest decentralized cryptocurrency exchanges (DEX) by transaction volume. It consists of a set of smart contracts running on the Ethereum blockchain and enables peer-to-peer (P2P) trades without a centralized intermediary.
Uniswap allows users to swap Ethereum-based tokens with each other almost instantly with the use of liquidity pools. It’s one of the best DEXs to purchase DAI with any Ethereum token that has liquidity on the exchange, such as ETH, MKR, BAT, LINK, etc.
However, purchasing DAI with fiat currencies (USD, EUR, GBP, etc.) is not possible on Uniswap.
Follow our step-by-step guide to learn where and how to buy DAI.
WARNING: Purchasing cryptocurrencies is risky. By the time you complete reading this post, the price of your favorite token may change. Please make sure you have considered all the risks involved.
Step #1: Selecting an Exchange
To purchase DAI, you need to select an exchange that trades DAI tokens. Binance, Kraken, Bitfinex, and Coinbase are among cryptocurrency exchanges that support DAI.
Please remember, not all crypto exchanges support purchases through fiat currency, and some exchanges can have regulatory restrictions or restrictions based on your location. So, before selecting an exchange, make sure it meets all your needs.
To demonstrate the purchase process, we have selected Kraken as an example.
Step #2: Creating an Account
Once you have identified the exchange of your choice, you need to go ahead and register an account with them.
First, you need to sign up on the exchange by entering a valid email address and a username. Make sure you secure your account with a strong password.
After you create an account, the exchange will send you a verification email. Once you confirm your email, you can start using the platform.
Please remember that most exchanges will also need you to pass a KYC (Know Your Customer) verification. You must submit your address and a Government-issued valid identification card (I.D.) to get verified to start trading.
Step #3: Funding Your Account
Your next step will be to fund your account.
Different payment methods can be used to fund your account, determined by the exchange. You can deposit fiat currency into your account through credit and debit cards or PayPal. You can also deposit cryptocurrencies.
Please make sure to compare your deposit options and associated fees before proceeding.
Step #4: Buy DAI
Once you have successfully funded your account, you can proceed to buy DAI.
You need to select the currency pair of your choice (USD/DAI, ETH/DAI) before moving forward. After rechecking that you have entered the correct amount, purchase DAI. Once the exchange approves your transaction, you will receive your DAI tokens.
Note: Since DAI is pegged to the USD, it’s best to check the price first to ensure its current price is either $1 or lower. If the price is higher than $1, it would be wise to wait for the value to drop before buying. Check the DAI price here before you proceed.
Where to Keep Your DAI
Another essential step to remember when buying any cryptocurrency is storing it safely. While you can opt to let your DAI remain on the exchange, it’s much safer to transfer your tokens to a decentralized custodial wallet for extra security. Each wallet comes with a unique set of keys, ensuring only you have access to your funds.
There are two types of decentralized wallets:
Hardware or Cold Wallets:
Hardware wallets are physical devices that store your cryptocurrency offline. They are similar to a pen drive which you must connect to the internet every time you want to access your funds. Although cold wallets come with a price, they are more secure. Remember to research the various cold wallets available in the market and always buy from a trusted dealer to avoid being scammed.
Software or Hot Wallets:
Unlike cold wallets, hot wallets are digital and operate online. While this makes them easier to access, they are less secure and prone to hacks.
You can install soft wallets on your mobile app or desktop, connect them to a cryptocurrency exchange, and easily access your funds.
DAI is an ERC-20 token and can be stored in Ethereum software wallets like MetaMask or TrustWallet. Alternatively, you can opt for hardware wallets like the Trezor and Keep key.
How to Buy DAI on CoinStats
To purchase DAI on CoinStats, you must connect your wallet and swap your existing tokens for DAI. CoinStats supports over 250 cryptocurrency exchanges and over 8,000+ coins.
Follow our step-by-step guide to buy DAI on CoinStats:
Step #1: Create an Account
To purchase DAI, you must have significant crypto tokens like Bitcoin, Ethereum, etc., in your wallet. To proceed, sign in or create an account on Coinstats.app. Once you’ve registered an account, enter DAI in the search field.
Step #2: Connect Your Wallet
Click “Buy DAI” in the upper right corner. Scroll down to the “swap” feature and connect the wallet where you store your tokens.
Once you click “Connect,” you’ll see various wallet choices offered by CoinStats. Search for your wallet and connect it.
You can also connect it by scanning the QR Code via WalletConnect or manually adding the Blockchain/Crypto and Wallet address in your web or mobile application.
Step #3: Select the Token
After successfully connecting your wallet, select the token you want to swap by entering data either in cryptocurrencies or USD/EUR. For example, we are swapping ETH for DAI or purchasing DAI with ETH. If you can’t find DAI in the swap, you can import it manually by using the contract address. Select the ETH token from your wallet in the “From” drop-down option, and the DAI token in the “To” field.
Step #4: Swap Crypto
Click on Advanced Options to change the slippage and gas settings. When you’re finished customizing, scroll down to the bottom of your screen and click the “Submit Swap” button.
After you’ve submitted your swap request, you’ll be prompted to confirm it. To begin the swap, review the information displayed on your web or mobile app screen, and click the “Confirm” button.
Your transaction is now being processed. The pace of your transaction will vary depending on the gas parameters you select. You can trace your transaction from the loader at the bottom right corner of the wallet’s home page.
NOTE: You’ll be charged Network Transaction fees, also known as gas fees. This refers to the charge necessary to complete a transaction on the blockchain. In essence, gas fees are paid in the native currency of the network, i.e., Ethereum for the Ethereum network. CoinStats also charges a small swap fee in addition to the gas fees.
Factors to Consider Before Buying DAI
Cryptocurrencies are complex and volatile investments, so you should extensively investigate each token before investing in it.
Consider the following factors before investing in DAI tokens:
Collateralization: The value of DAI is determined by the value of the underlying collateral in MakerDAO, a lending platform that powers DAI. The protocol works by allowing anyone to take out loans in DAI using other cryptocurrencies as collateral. These loans are overcollateralized, i.e., you must deposit more cryptocurrency than you borrow. As of August 2022, the minimum collateralization rate of a “vault” of ETH is 170%, meaning that you would have to collateralize $170,000 worth of ETH to receive $100,000 worth of DAI.
As of August 2022, DAI is backed by $10.6 billion worth of crypto assets and $100 million from Huntington Valley Bank. It is overcollateralized at a ratio of 141%, according to data from Daistats.com.
Stablecoins: DAI is pegged to the US dollar and is intended to provide price stability and protection from crypto market swings. The basic goal of stablecoins is to allow investors to trade exclusively in crypto without having to worry about huge swings in asset value. As a result, stablecoins will not grow (or fall) in value and should not be acquired to make money.
Competition: The stablecoin market is becoming increasingly competitive, with a slew of new projects (including Tether, DigixDAO, and Basis) launching their own price-stable cryptocurrencies.
What Is the Cheapest Way to Buy DAI
The cheapest way to buy DAI is through decentralized exchanges (DEXs) like Uniswap, Bitfinex, SushiSwap, etc.
How to Buy DAI With Cash
Some exchanges like Coinbase, Kraken, Changelly, etc., enable you to buy DAI with cash using fiat currency. While choosing an exchange, check if it supports credit or debit cards, wire transfers, ACH, or Apple Pay deposits.
Ensure to consider geographic limitations and the exchange’s security before initiating any transactions.
One of the key uses of Dai is to provide liquidity for various DeFi projects, and currently, more than 400 DeFi apps have integrated Dai.
Owners of Dai are motivated to lock their assets in liquidity pools by subsequently earning trading fees in exchange for creating a market. Several services offer to lend on DAI deposits:
- Coinbase users can earn two percent a year on their DAI deposits. The Coinbase Card allows users to spend DAI by converting it into fiat on a Visa Card.
- dPiggy dApp allows users to earn interest and have their returns automatically used to purchase various crypto assets at the end of each month.
- Bitcoin can also be used to generate DAI.
DAI is on its way to becoming the first trustless mainstream currency. As of July 2021, there were roughly 5.5 billion Dai in circulation, making it the fourth-largest stablecoin by capitalization.
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The information contained on this website is provided to you solely for informational purposes and does not constitute a recommendation by CoinStats to buy, sell, or hold any securities, financial product, or instrument mentioned in the content, nor does it constitute investment advice, financial advice, trading advice, or any other type of advice.
Cryptocurrency is a highly volatile market sensitive to secondary activity, do your independent research, obtain your own advice, and only invest what you can afford to lose. There are significant risks involved in trading CFDs, stocks, and cryptocurrencies. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider your own circumstances and obtain your own advice before making any investment. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant regulators’ websites before making any decision.