0

Why would one borrow Dai instead of buying from exchange ? if i have $150 worth ether i can borrow $100 worth Dai. With 8% stability fee basically at 8% interest rate. On the other hand i can just exchange ether for Dai and get $150 worth Dai without any interest. what is the logic here

  • youtu.be/9w7h50OB-Mc This video explains it all. The price of dai is not stable. We are making it stable. – Amiya Behera Feb 12 at 9:40
  • When you buy dai, it's not $100 worth. It's much cheaper. You are buying 100 dai, not $100 worth dai. – Amiya Behera Feb 12 at 9:54
  • if i am not wrong if you want to create 1 dai you have to deposit 1.5 $ worth of ether and when you buy a dai from exchange its 1dai =1$ – Shilpan Shukla Feb 15 at 6:30
0

Lets say, you own 1 ETH, which currently has a price of 300$. When you sell this, you can buy DAI worth 300$ on the makret (around 300 DAI). And when you sell the DAI, you will get back around 300$, as expected from a stable coin.

But when you deposit you 1 ETH, to get 200 DAI, you effectively keep your ETH, you just can't use it right now. When the price of ether increases (lets say 10% in 1 year) more than the interest rate (8%), you can get back the 1 ETH, for 216 DAI. So you have to buy 16 additional DAI for 16$. But now you have 1ETH, which is worth 330$. So you have 330$-16$=314$, when you sell it, instead of just 300$. This also works, when you deposit new ETH to get the 16 DAI, instead of buying it on a markt for $.

There may be more reasons, that work when you expect the price of ETH to go down as well, but this the only reason I know right now.

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.