

Is the stablecoin DAI safe? Has DAI collapsed? Detailed explanation of the stability mechanism
Jul 16, 2025 am 06:09 AMIs the stablecoin DAI safe? Has DAI collapsed? Detailed explanation of the stability mechanism
DAI is a decentralized stablecoin issued by MakerDAO protocol. Unlike stablecoins such as USDT or USDC issued by centralized institutions, DAI operates entirely based on smart contracts and is anchored to a 1:1 dollar value . Because the mechanism behind it is based on collateral assets and liquidation mechanisms, DAI is considered to be one of the most representative stablecoins in the DeFi ecosystem.
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1. Is DAI safe?
- DAI is a stablecoin generated by over-collateralized crypto assets , with a collateral ratio of typically above 150%.
- All operations are automatically executed through on-chain smart contracts, without centralized hosting, and risk dispersed .
- Core assets support include tokens with strong liquidity and high value recognition such as ETH, WBTC, USDC, and LDO.
- The liquidation mechanism ensures that the system can automatically balance risks when asset prices fluctuate.
2. Has DAI collapsed?
- DAI has temporarily deaned its anchor during severe market fluctuations (such as "Black Thursday" in March 2020), but there has been no systematic collapse .
- In extreme market conditions, due to the rapid decline in collateral assets, the liquidation process was delayed for a while, causing the DAI price to rise to US$1.1 for a short period of time.
- The MakerDAO community later enhanced its risk resistance by increasing the types of collateral and introducing stable reserve assets (such as USDC) .
- In the following years, the DAI stability mechanism has been continuously iteratively optimized, and its stability has been significantly improved .
3. Detailed explanation of DAI's stability mechanism
1. Over-collateralization
- To generate 1 DAI, you must mortgage crypto assets (such as ETH) with a value of more than USD, and the collateral rate is set to 150% or above.
- The mortgage position (Vault) must be maintained continuously and a healthy mortgage ratio, otherwise it will be forced to liquidate .
2. Clearing mechanism
- When the market price drops, the collateral ratio is lower than the minimum requirement, the system automatically auctions the collateral to repay the DAI and destroy it.
- This process ensures that the supply of DAI always corresponds to real mortgage assets.
3. DAI reserve support (PSM module)
- MakerDAO introduced Peg Stability Module , allowing users to exchange assets such as USDC into DAI 1:1.
- This mechanism enhances the stability of DAI's anchoring to the US dollar while ensuring market liquidity.
4. Comparison with centralized stablecoins
- DAI does not rely on centralized custodians and does not require bank account support.
- Users can publicly view the on-chain staking, and the transparency is much higher than that of centralized stablecoins such as USDT .
- But at the same time, it also faces potential risks such as delay in liquidation and excessive pressure during severe price fluctuations.
Summary: DAI is a stablecoin based on over-collateralization and decentralized governance . Its security comes from the coordinated guarantee of smart contracts and community mechanisms. Although brief deans were experienced in history, there was never a systematic collapse. For users familiar with DeFi operating mechanisms, DAI is a stablecoin choice that takes into account transparency, security and trustworthiness .
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