Meet the Stablecoins, Ep. 4: DAI
The ‘D’ in ‘Decentralized’
The Hummus Exchange is an Automated Market-Maker (AMM) built exclusively for swapping stablecoins on the Metis Andromeda network with extremely low slippage and minimal fees. The protocol’s design allows for the pools to not only interact with each other but also to be flexible and grow relative to the natural supply and demand characteristics of the market. The backbone of the Hummus protocol is the staking mechanism. Hummus allows you to deposit and then stake certain stablecoins “single-sided” in its liquidity pools. This design allows new stablecoins to be added seamlessly, without the complications evident in legacy AMM designs.
Episode 4 of this educational series, Meet the Stablecoins, introduces users to the largest of the so-called “algorithmic” stablecoins: MakerDAO’s DAI.
MakerDAO & DAI
DAI, like many other stablecoins, is pegged to the U.S. dollar, meaning that DAI is designed so that one DAI token can always be exchanged for one U.S. dollar, and vice versa. However, DAI differs in many ways from centralized asset-collateralized stablecoins like USDC and USDT.
The DAI token is governed by a Decentralized Autonomous Organization (DAO) called MakerDAO. This DAO and the DAI tokens themselves are controlled by smart contracts and specifically by users who hold MKR tokens, the voting currency of MakerDAO. MKR holders are responsible for governing the Maker Protocol, which includes adjusting policy for the DAI stablecoin, choosing new collateral types, and improving governance itself. Anyone can hold MKR.
DAI is not a hard-pegged currency, so it does not perfectly track the value of an existing fiat currency. Rather, it is meant to maintain a free-floating peg with very low volatility against the US dollar. The token attempts to achieve this stability “through a combination of external market forces, complementary internal economic incentives, and policy tools controlled by MKR token holders.” This is why some refer to DAI as an “algorithmic stablecoin.”
DAI lives on the Ethereum network and all circulating Dai are generated from Maker Vaults and are “backed by a surplus of collateral assets,” per Awesome-MakerDAO, the community group. These assets are other cryptocurrencies. Because DAI is decentralized and lives on-chain, users can view real-time data about the system and its collateral.
DAI on Hummus Exchange, Metis Andromeda
DAI can be found on many centralized and decentralized exchanges. The bridged version of DAI is typically identified by a prefix — it is m.DAI on Metis. Bridged assets are not native assets. Rather, bridged assets must be bridged back to a network where they exist natively.
The Hummus Exchange very recently launched its m.DAI pool and swap. Users who had been in Hummus’ DAI pool will need to migrate.
Users can swap m.DAI for other stablecoins on the Hummus Exchange with extremely low slippage and fees. They can also stake m.DAI to generate yield, and stake HUM alongside that to boost that yield.
About the Metis Marathon
MetisDAO Foundation has announced the Metis Marathon, a 26-week-long builder incentive program that aims to incentivize a fierce development of the Metis ecosystem. Besides introducing some of the Top DeFi protocols by TVL to our ecosystem, the Marathon will also help create a native powerhouse by directly incentivizing some of Metis’ most innovative native dApps.
About Hummus Exchange
The Hummus Exchange protocol is a single-side and decentralized AMM designed for exchanging stable cryptocurrencies on the Metis blockchain.
Users can swap stablecoins on the Hummus Exchange with extremely low slippage and fees. They can also stake stablecoins to generate yield, and stake HUM tokens alongside to boost that yield.
Come check us out! Stop by to swap or stake around for longer.