Real estate loan companies from the United States participate in this process. DAI becomes a bridge between decentralized and traditional finance.
DAI, which maintains price parity with the US dollar, also has the support of real-world assets (RWA). Since April 21st, a total of 35,913 units of the stablecoin have received support from real estate assets.
It is possible to view the data, which Mariano Di Pietrantonio confirmed and detailed, on the DaiStats website. He is the head of marketing at MakerDAO, the organization that develops the token.
On Twitter, Di Pietrantonio described this milestone as the beginning of “a new era.” He said that real estate prices “do not move that much,” so there should not be frequent liquidations of these assets as collateral. He highlighted that the price of a house or an apartment does not go down much per year.
Many seem to have interpreted the novelty as a signal to buy the Maker (MKR) governance token. This crypto-asset went from USD 3,400 to USD 4,900 a few hours after people heard this. It then fell sharply, alongside the entire cryptocurrency market, and each MKR is now trading at around USD 4,115.
Other Assets that Could Support DAI
Apart from RWAs, the stablecoin continues to add collateral in crypto-assets. Voting on the incorporation of several tokens, some of which are little known, is open on the MakerDAO platform. Moss Carbon Credit (MCO2), 1inch (1INCH), Badger Sett Badger (BADGER) and Rocked Pool Stacked ETH (rETH) could begin to collateralize DAI.
DAI initially received support only from the collateral in Ether (ETH), Ethereum’s native cryptocurrency. However, the stablecoin has been multi-collateralized since the end of 2019.
The price of DAI remains stable thanks to token-wrapped Bitcoin (wBTC), the representation of Bitcoin (BTC) on Ethereum. There are also centralized stablecoins as collateral for DAI: Paxos Standard (PAX), USD Coin (USDC), and USD Tether (USDT). This situation has sometimes opened the debate as to whether DAI is decentralized as it presents itself.
Any user may put these tokens as support for DAI within MakerDAO to then receive a loan in that stablecoin. When returning it (with an interest or “stability fee”), the owner of the collateral recovers it and the “burning” of DAI takes place.
What Happens If the Price of the DAI Collateral Drops?
Many fears what could happen if there were an abrupt drop in the price of the crypto assets that collateralize DAI due to their volatility. This fear is greater about small-cap assets, such as those introduced after the aforementioned vote.
Economist Santiago Di Paolo explains that the vault sells the collateral deposited to recover users’ issuance in case of a sharp drop. Besides, they get a stability fee and a “liquidation penalty” of 13% of the debt.
Di Paolo says that the “vault” is the storage location where users lock the collateral. This is a smart contract that can destroy DAIs or sell the collateral to balance the system, as needed.
A drop in the price of some collateral would harm the individual who placed those tokens as collateral to receive the loan. However, this would not affect the stability of the price of the stablecoin.
By Alexander Salazar
