Is DAI over collateralized?

DAI, a decentralized stablecoin, differs significantly from fiat-backed stablecoins in its reliance on a distinct mechanism known as crypto over-collateralization. This approach ensures stability and trustworthiness without direct backing by a central authority or traditional currency.

The process involves users depositing cryptocurrencies, such as ETH, into a smart contract situated on the Ethereum blockchain. This act serves as a form of collateral, underpinning the value and stability of DAI tokens.

The smart contract employed by DAI operates under strict rules, ensuring that the collateral exceeds the value of the DAI issued. This over-collateralization is a crucial aspect, as it provides a buffer against market fluctuations and minimizes the risk of default.

By leveraging the Ethereum blockchain's robust infrastructure and smart contract capabilities, DAI offers a decentralized, trustless, and secure alternative to traditional stablecoin models. Users can confidently transact with DAI, knowing that the underlying value is secured by a diverse portfolio of digital assets.

Among the many cryptocurrency exchanges that support DAI, BTCC stands out as a top player. BTCC offers a comprehensive suite of services tailored to the needs of cryptocurrency enthusiasts and traders. These services include, but are not limited to, spot trading, futures trading, and a secure wallet solution.