Dai (ticker DAI) is one of crypto’s most interesting stablecoins — and it’s a coin in transition right now, because the project behind it has rebranded and Dai itself is being phased out in favour of a new successor called USDS. Understanding the original Dai is still useful, because the design it pioneered is genuinely different from the better-known stablecoins like Tether and USDC. Here’s the plain-language guide, including the current state of play.
What Dai was (and partly still is)
Dai is a “decentralized stablecoin” — a cryptocurrency designed to hold a stable value of roughly 1 US dollar, but maintained by code and crypto collateral rather than by a company holding dollars in a bank. It was launched in 2017 by a project called MakerDAO and ran (and still runs) on the Ethereum blockchain. For years it was the leading decentralized stablecoin and a foundational piece of decentralized finance (DeFi).
How it works (the key innovation)
Here’s what made Dai distinctive. Tether (USDT) and USD Coin (USDC) keep their dollar peg by holding actual dollars (and equivalents) in reserve — for each token, there’s roughly one dollar in a bank account somewhere. Dai works differently: it’s created when users deposit crypto (originally Ether, now various assets) as collateral into smart contracts called “Vaults,” and borrow Dai against it. The collateral is worth more than the Dai borrowed (it’s “over-collateralized”), and a system of automated rules and incentives keeps Dai’s price near $1. If the collateral falls in value too much, it can be sold off to maintain the peg. In short: Dai is backed by crypto and code, not by a bank account.
The Sky/USDS rebrand — the current state
This is the important bit for understanding Dai in 2026. In August 2024, MakerDAO rebranded itself to “Sky” and launched a new stablecoin, USDS, designed to gradually replace Dai. Dai holders can convert their Dai to USDS at a 1:1 ratio at any time. Through 2025 and into 2026, major exchanges — Binance, Coinbase, Crypto.com — completed migrations that automatically converted Dai balances to USDS for their users. As of mid-2026, Dai still exists and circulates (around $4–5 billion in supply), but USDS has become the larger and more actively supported token, especially on exchanges. Dai is now best understood as a legacy version of a system that has moved on.
The honest risks and caveats
Even setting the rebrand aside, Dai (and decentralized stablecoins generally) carry real risks worth understanding. Smart contract risk: the system relies on code that could have bugs or be exploited. Collateral risk: in extreme market crashes, the value of crypto collateral can fall fast enough that the system struggles to maintain the peg. Governance risk: a community of token-holders makes decisions, and those choices affect stability. Centralization concerns: over time, Dai became increasingly backed by USDC (a centralized stablecoin) as part of its collateral, which somewhat undermined its “fully decentralized” narrative. And specifically for 2026: choosing to hold Dai instead of converting to USDS means choosing the legacy asset over the actively-supported successor.
What a beginner should take from this
Dai is worth understanding because its design — a stablecoin backed by crypto collateral and code rather than by a company — is genuinely important conceptually. It’s a different answer to “how do you make a stable cryptocurrency” than Tether or USDC. In practical terms today, if you encounter Dai, know that it’s becoming USDS, and that swapping for the successor is the supported path forward in most places. If you don’t already hold Dai, the more relevant question is probably “what is USDS” rather than “should I buy Dai.” As always: stablecoins are not entirely without risk, and “stable” is a goal, not a guarantee. This is education, not financial advice.
Key takeaways
Dai (DAI) is a decentralized stablecoin launched in 2017 by MakerDAO, designed to hold roughly $1 by being backed by over-collateralized crypto deposits rather than by a company holding dollars in a bank. Its design is genuinely distinct from Tether or USDC. As of 2024, MakerDAO rebranded to Sky and launched a successor stablecoin called USDS, which is gradually replacing Dai; major exchanges have automatically converted user Dai balances. Dai still exists but is being phased out. Risks include smart contract risk, collateral risk, and the practical fact that Dai is now a legacy asset compared to its supported successor. This is education, not financial advice.
New here? This pairs naturally with our profiles of Tether (USDT) and USD Coin (USDC) — the two largest centralized stablecoins. For the bigger picture on stablecoin design and risks, see are stablecoins safe and why so many stablecoins fail.
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