First published 15 April 2020. Expanded in October 2026 for the Sky tokens, which a lot of pages now treat as if Dai had been switched off. Dai is a token on Ethereum that aims to stay near one US dollar. It is not issued the way Tether or USDC is issued. In the Maker system you lock other crypto as collateral and mint DAI against it. If the collateral falls far enough, the position is liquidated. That is the cost of minting, not a footnote.
Stablecoins: useful, not magic is the category. What is Tether (USDT)? and What is USDC? are the company IOUs. This page is the collateral machine, and the rename that did not delete it.
Two tokens, then a rebrand
The first version, in 2017, was backed only by ether and was later called Sai. Multi-collateral Dai replaced it in November 2019. Sai is not DAI. People who held Sai had to migrate. A wallet that still shows Sai is showing a retired token, not a rounding error.
In 2024 the organisation behind Maker rebranded as Sky. It introduced USDS, a later dollar token you can convert from DAI, and SKY, a later governance token you can convert from MKR. Conversion is a transaction you sign. It is not something the protocol did to every balance overnight. DAI still moves. MKR still exists. A guide that says “the ticker is SKY now” has collapsed four tokens into one. What you hold is whichever contract your wallet is displaying. What is Sky (SKY)? is that governance token. This page stays the dollar.
How the peg is leaned on
Borrowers mint DAI by locking collateral above a ratio governance sets. They pay a stability fee, which is interest by another name, and that fee is also a parameter. If the collateral’s price falls through the ratio, the system sells it to cover the debt. Nobody at Maker phones you first. DeFi is software with rules you cannot call support about.
The system has also held USDC through a module that swaps DAI and USDC near a dollar. That means a slice of the backing has, at times, been someone else’s company dollar token. “Backed by crypto” and “partly backed by USDC sitting in a contract” can both be true. Frozen USDC does not freeze every DAI, and it is not irrelevant to the reserves either. Read the current collateral if the amount matters. A blog post from the year you first heard of Dai is not the mix today.
A savings rate on DAI locked in the system’s own contract is another parameter. It is not a bank account, and it is not staking in the Ethereum sense. Staking is a lock and a queue, not a savings account is the neighbouring idea. The rate you saw in a screenshot is the rate on the day of the screenshot.
Before you send it
DAI on Ethereum is an ERC-20. An address that starts with 0x on a different network is a different notebook. Bridged DAI is a bridge’s token. USDS is not DAI until you convert, and converting is an approval and a signature. A wallet signature is not a handshake. Ignore a token that appears and offers to “upgrade your DAI” on a site you did not open yourself.
Nothing here is an instruction to mint, borrow, convert, or hold DAI. Collateral, a fee, and a liquidation robot are the product. The dollar in the ticker is the target, not a guarantee.
