Now, DAI algorithmic stablecoin is backed by more ether (ETH) than USD Coin (USDC) centralized stablecoin.
This milestone comes after months in which the USDC has totaled more than 50% of the decentralized cryptocurrency’s backing.
At this time, the amount of ETH as a guarantee from DAI has risen to 41.4% and the amount of USDC has dropped to $34.5, according to data from the Dai Stats website.
The milestone also indicates a drop in stablecoin’s reliance on centralized entities (a key element of the industry).
That’s because USDC is operated by a consortium called the Centre, whose members are Circle and Coinbase, which maintain the value of stablecoin through US dollar cash reserves and other financial instruments that track the fiat currency.
Center also has control over each USDC outstanding in the market and has made this clear several times.
In July 2020, for example, the consortium froze an Ethereum address that holds $100,000 USDC because of its cooperation with law enforcement agencies.
On the other hand, ether is not backed by a fiat currency. It is a decentralized currency with a market that determines its value. It would be almost impossible to suspend transfers on Ethereum.
What is DAI?
DAI is a stablecoin managed by the MakerDAO Decentralized Finance (or DeFi) protocol. It maintains its dollar backing by carefully curating a pool of assets developed at Ethereum.
When you deposit an asset developed on Ethereum, such as USDC or ETH, on MakerDAO, you receive DAI in return.
Stablecoin is over-guaranteed to offset the industry’s infamous volatility. This means that when you deposit US$150 into Ethereum, you will receive US$100 in DAI.
This pool used to be completely composed of decentralized assets such as ether. However, when the covid-19 pandemic came, MakerDAO voted to change that.
The market became so unpredictable that, at the time, the protocol needed a stable asset to avoid collapsing. In March 2020, the MakerDAO community voted to partially back DAI with USDC.
Despite the continued dominance of stablecoin, causing doubts arose since DAI is USDC under a different name, it looks like the industry’s most popular decentralized stablecoin is back.
*Translated and edited by Daniela Pereira do Nascimento with permission from Decrypt.co.
