I am reading about stablecoins in order to understand which one would be best suitable for my need( let users of my app be payed or rewarded by a crypto and at the same time lowering the effect of volatility.

I am considering the main to:



They both have benefits, the promising thing about DAI is that it claim to be decentralised and this is achieved though the process of Collateralized Debt Position, that is not that so clear to me.

Any one could explain that process?

1 Answer 1


The process of how DAI works is rather complicated. I'm not an expert in it so I can only provide you with a very much simplified answer:

  • In the beginning we assume that 1 DAI = $1
  • If the value of DAI goes below $1 people are incentivized to buy DAI as they know its value will rise back to $1. More demand means that the price goes up.
  • Similarily when DAI goes above $1 people have monetary incentive to sell DAI as they know they can buy it back at $1. Selling means that the price goes down.

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