How It Works
DAI is minted through Maker Vaults (previously Collateralized Debt Positions). Users lock collateral (ETH, WBTC, stETH, etc.) into a Maker Vault smart contract and mint DAI up to a collateralization ratio set by governance (e.g., 150% for ETH means $150 of ETH to mint $100 of DAI). If collateral falls below the liquidation ratio, automated keepers liquidate the vault and sell collateral to repay the DAI debt plus a stability fee (Maker's income). The Peg Stability Module (PSM) allows 1:1 swaps between DAI and USDC with no slippage, anchoring the peg. Since 2023, Maker has deployed billions into US Treasury bills via the RWA vaults, earning yield that funds the DSR (DAI Savings Rate).
Backing Type: Crypto-Collateralized
Crypto-collateralized stablecoins are over-collateralized by on-chain assets such as ETH, WBTC, or other tokens. Users lock collateral in smart contracts to mint stablecoins, and automated liquidations maintain solvency if collateral values drop.