DAI was created by MakerDAO, founded by Rune Christensen in 2015 and launched in December 2017 — the oldest major decentralised stablecoin. MakerDAO rebranded to Sky Protocol in August 2024 and launched USDS as DAI's upgraded successor. Users can convert DAI to USDS 1:1. The protocol is governed by MKR (now SKY) token holders.
DAI is an overcollateralised decentralised stablecoin — users mint DAI by depositing crypto collateral into MakerDAO vaults. It has survived multiple severe crypto bear markets including the March 2020 Black Thursday event and the 2022 bear market, maintaining its peg throughout. One of the most battle-tested smart contract systems in DeFi with over 8 years of operation without a major exploit.
DAI maintains a $1.00 peg and has no upside price potential. Its market cap has declined from a $10 billion peak in 2022 to approximately $4.2 billion as users migrate to USDS which offers native yield. DAI and USDS are freely convertible 1:1.
DAI was once the dominant decentralised stablecoin but has ceded ground to its own successor USDS. Its strength remains its 8-year track record and deep DeFi integration across hundreds of protocols.
DAI's primary risk is smart contract risk. DAI now holds significant USDC in its Peg Stability Module, creating dependency on a centralised stablecoin. The migration to USDS is reducing DAI's future relevance.
The Sky Protocol ecosystem grows, keeping DAI relevant as a legacy entry point to USDS, or DAI integrations in specific DeFi protocols that have not yet migrated create sustained demand.
Migration to USDS accelerates, leaving DAI as a diminishing legacy product with declining liquidity, or a smart contract exploit in the Sky ecosystem affects both DAI and USDS simultaneously.
We would become more positive if: DAI maintains deep DeFi integrations while USDS grows alongside it rather than replacing it. We would become more cautious if: major DeFi protocols deprecate DAI in favour of USDS, reducing liquidity and utility.
DAI is one of the most important innovations in DeFi history. For users who want a battle-tested transparent decentralised dollar, DAI remains excellent. However, USDS is now the actively developed product with native yield. If choosing between them for new DeFi use, USDS is the better option going forward.
DAI vs USDS: DAI and USDS are issued by the same protocol (Sky, formerly MakerDAO) and convertible 1:1. USDS offers native yield through the Sky Savings Rate (~4% APY); DAI does not. For active DeFi users, USDS is now the preferred choice.