Overview
DAI is the first over-collateralized crypto-backed stablecoin, launched by MakerDAO on December 18, 2017 (more on the launch in "History of Stablecoins"). On August 27, 2024, the protocol officially rebranded to Sky as part of its "Endgame" plan; on September 18, 2024, a new governance token, SKY, and a new stablecoin, USDS, launched. The profile of the organization behind the protocol is covered in "Sky."
Mechanism and backing
A user locks crypto collateral into the protocol's "Vaults"; DAI or USDS is minted against that collateral up to a maximum loan-to-value set by governance — minimum collateralization ratios typically run 130–175% depending on the asset; if the ratio falls below the liquidation threshold, an automatic auction of the collateral is triggered. Over the years the protocol has substantially diversified its collateral into real-world assets (RWA): allocations to short-dated US Treasuries run through external managers such as BlockTower; per third-party on-chain analytics, RWA collateral exceeded $1.5 billion by early 2026 and became the protocol's largest single revenue source. Unlike Circle or Tether, the protocol has no single external attestation — its collateral composition is publicly visible on-chain in real time through trackers such as MakerBurn and DaiStats.
DAI/USDS and MKR/SKY conversion
DAI and USDS convert 1:1 in either direction, fee-free, through the DAI-USDS Converter smart contract; similarly, the MKR governance token converts to SKY and back at a fixed 1:24,000 ratio through the MKR-SKY Converter contract. USDS holders can additionally stake the token into the Sky Savings Rate module and earn yield funded by RWA allocation income, the Spark protocol's borrow rate, and stability fees on USDS minted through Vaults; holders of the original DAI earn a comparable yield through the older DAI Savings Rate mechanism. Both rates are set by SKY holder governance and change over time, so the current figure should be checked on the protocol's own dashboard rather than in this article.
Networks
DAI is issued natively on Ethereum and also natively available on Optimism, Arbitrum, Polygon, and Base; USDS launched on Ethereum, Base, and Solana, with further network expansion as the protocol develops.
Incidents
On March 12, 2020 ("Black Thursday"), ETH's price fell roughly 43–50% within hours amid the broader market crash triggered by the start of the COVID-19 pandemic. Ethereum network congestion pushed gas prices up roughly 10x, causing liquidation-auction keeper bots running on fixed gas settings to miss their bids — this let a handful of participants win collateral auctions at zero cost, with one address acquiring about $8.32 million of ETH for 0 DAI. The result was roughly $4–4.5 million in system bad debt, which MKR holders covered by voting to mint and auction additional MKR on the open market — diluting their own holdings to make the protocol whole.