Going Through the CDP Life Cycle of Multi-Collateral DAI
Introduction MakerDAO released SAI as the Alpha version in December 2016, and DAI was released as a beta version in December 2017. DAI is currently a single-collateral model, which means you can lock only a single type of asset. Thus, DAI support only ETH(PETH, precisely speaking) right now, but they will upgrade this single-collateral DAI to multi-collateral DAI where they support more than one collateral types(PETH will be removed and regular ETH will be usable among other collateral). For example, they are planning to use Digix as its next asset, which is a token backed by physical gold. Eventually, multiple assets could be used to create a single CDP, including ETH, other ERC20 tokens, non-fungible tokens or other fungible token standards like ERC777. This upgrade is expected to make it easy for people to create DAI and reduce the risk of under-collateralization through diversification of their collateral. People will have more options when they lock up their collateral. It’s risky to invest only with ETH because the collateralization ratio depends solely on the price of ETH. If you don’t understand how single-collateral DAI system works, I suggest that you read my previous blog before proceeding. There are already the smart contracts for multi-collateral DAI test releases on Kovan testnet. They have also updated their tools to help us interact with the MCD system. You can check out a CDP portal site, a command line tool, Dai.js library and others. In this post, we are going to use their command line tool, mcd-cli, to go through the lifecycle of CDPs. This guide is based on MakerDAO’s official guide on mcd-cli, but I added some explanations and set up instructions as I had a hard time understanding some parts of it. Also, keep in mind that this guide is…
Why Is DAI Stable?
Last year, a part of my salary was paid with ether. It made sense for both my client and me because it was easy and cost-efficient. As you may know, the market price of ether plummeted last year, and as a lazy person who didn’t bother exchanging it immediately with fiat money, I lost a fair amount of money. It was around that time of the bear market that I first seriously looked into stable coins. How wonderful is it if cryptocurrencies protect us from downward fluctuations without going through a tedious process of exchanging volatile cryptocurrencies with fiat money?