I suddenly started get concerned about cryptocurrencies when I read that Sberbank, a bank, majority owned by the Russian state, was to issue it's own stablecoin called SberCoin which was to be exchangeable 1-for-1 with the Russian rouble. What does this mean? And why are the Russians ahead of the Western alliance on this? Why would anyone want SberCoin when you could just have good old-fashioned roubles instead? Do the Russians know something I don't? Probably.
This investigation led me on to central bank digital currencies which are apparently all the rage in Frankfurt, London and Washington. But why would anyone want this new-fangled dross, when we have good old fashioned currencies which seem to be doing the job?
Then I cam across Dai. Dai is a stablecoin that is tied one-to-one with the US dollar. Unlike SberCoin it is not controlled by a government (so that's a plus). But there is at least one really important difference between the USD and Dai. On the USD you might be able to earn 0.5%, but Dai deposits are offering 6%. Is this not the perfect arbitrage opportunity? My trader brain went into overdrive and I got all excited and sweaty. This seems like a no-brainer. Borrow USD at rock bottom rates, switch them for Dai and laugh all the way to the bank.
Dai is one of the most interesting crypto ideas I've come across. Like other crypto, you can buy Dai on a crypto exchange. Dai though isn't created like bitcoin (computers doing maths), but is issued almost in the way that a central bank issues its notes.
The central authority in charge of Dai is the Maker DAO. DAO is 'digital anonymous organisation'. To make Dai, you deposit collateral into a vault. The collateral has to be a digital asset on the Ethereum blockchain, so Ethereum, BAT or USDC are acceptable. When you want your collateral back you deposit your Dai and retrieve your collateral minus a 'stability fee'.
The current state of collateral, fees for collateral and auctions for seized collateral can be seen here: https://catflip.co/maker/
List of collateral held can be seen here: https://daistats.com/#/
Dai is not a centrally controlled organisation.
For other stablecoins, the issuers of the coin is a company that should be fully collaterised. So when you want to convert your USDC or SberCoin back to the underlying currency, the organisation is good for it. In a…
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