By Eco research. Updated May 2026.
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DAI is a decentralized, overcollateralized stablecoin pegged to the US dollar and issued by Sky (formerly MakerDAO). Unlike USDC or USDT, no company holds the reserves. Users lock crypto collateral into onchain smart contracts called Vaults, and the protocol mints DAI against that collateral. As of Q1 2026, DAI supply sits near $4.6B per DeFiLlama, with a sister token, USDS, at roughly $8.7B following the 2024 Sky rebrand.
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DAI is minted when a user opens a Maker Vault, deposits approved collateral (ETH, wstETH, USDC, real world assets), and borrows DAI against it. The Vault is overcollateralized, governance sets the stability fee, and liquidations restore solvency if collateral value falls below the required ratio. Repayment burns the borrowed DAI and unlocks the deposit.
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The mechanism predates most onchain credit systems. Sky's core contracts handle minting, the Dai Savings Rate, and the Peg Stability Module (PSM), which lets users swap USDC for DAI 1:1 to absorb peg deviation. The Maker Buffer collects fees and funds surplus auctions. A user holding DAI does not need to manage a Vault; most DAI in circulation is held by people who acquired it on a DEX or centralized exchange. Read more on how stablecoins work for the broader peg picture.
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DAI is backed by onchain collateral and governed by token holders. USDC and USDT are backed by offchain reserves (cash, Treasuries, repo) held by Circle and Tether, respectively, and minted only when those issuers receive a wire. The trust model is opposite: DAI trusts smart contracts and oracles, USDC and USDT trust an issuer and its auditors.
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The table below summarizes the differences across the three largest dollar stablecoins.

Supplies pulled from DeFiLlama. The centralized issuers can freeze tokens at named addresses; DAI has no protocol-level freeze function on its core contract, though USDC inside the PSM remains freezable at the USDC contract level.
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DAI launched in December 2017 as Single-Collateral DAI (SAI), backed only by ETH. In November 2019, MakerDAO migrated to Multi-Collateral DAI (MCD), which accepted multiple collateral types and introduced the Dai Savings Rate. The token retained the DAI ticker; legacy SAI was wound down. The protocol then added real-world asset Vaults and USDC-backed PSM capacity through 2021 and 2022.
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In August 2024, MakerDAO rebranded to Sky and launched USDS as an upgraded stablecoin, plus SKY as the upgraded governance token. DAI and MKR were not deprecated. Holders can convert DAI to USDS and MKR to SKY at fixed ratios via the official upgrade contract, or keep DAI and MKR indefinitely. Both tokens remain redeemable, listed, and integrated across DeFi. See the USDS overview for the Sky side.
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DAI holds its dollar peg through three mechanisms working together: overcollateralization, the Peg Stability Module, and stability fees. Overcollateralization means every DAI is backed by more than $1 of collateral, with liquidation thresholds enforced by Maker's oracle feeds. The PSM lets arbitrageurs swap USDC for DAI 1:1 (and back) at zero slippage, snapping deviations toward parity.
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The third lever is monetary policy. Governance adjusts the DAI Savings Rate (DSR) and stability fees to influence supply. When DAI trades above $1, governance can cut the DSR or reduce stability fees, expanding supply. When DAI trades below $1, raising fees contracts supply. Live policy parameters are visible on MakerBurn, an independent dashboard tracking Sky's balance sheet, revenue, and Vault distribution.
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DAI is governed by holders of MKR and, post-2024, SKY. Voters approve new collateral types, set stability fees and the DSR, ratify oracle feeds, and direct surplus revenue. There is no CEO and no centralized issuer; changes pass by onchain executive vote. The governance forum, polling system, and executive contracts are public at vote.makerdao.com and the Sky Atlas, which codifies the protocol's constitution.
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This matters for users because parameters that affect DAI's safety and yield are set by token vote, not by a corporate board. The trade-off is that governance moves slower than a centralized issuer can act in a crisis. During the March 2023 USDC depeg, when DAI briefly tracked USDC's discount because of PSM exposure, the Sky community debated and shipped collateral-rebalancing votes within days, not hours.
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Both are usable. DAI has deeper integration history, longer track record across DEXes and lending markets, and remains the dominant decentralized stablecoin in legacy DeFi positions. USDS is Sky's forward token, picks up new Sky features first (like the Sky Savings Rate and Sky Token Rewards), and is what new Sky integrations default to. The two are convertible 1:1 at the upgrade contract.
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For a builder choosing today, USDS is the protocol's primary path. For a user with existing DAI in Aave, Curve, or a Vault, holding DAI remains fine. The DAI to USDS upgrade guide walks through the conversion, and the Sky governance overview covers the SKY transition.
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DAI and USDS live on multiple chains (Ethereum, Base, Optimism, Arbitrum, and others). Moving them between chains for payments, treasury, or DeFi positions requires a bridge or a routing layer. Eco Routes settles stablecoin transfers across 15+ supported networks with single-transaction UX, abstracting the underlying bridge selection. For a developer, that means quoting a transfer in DAI on Ethereum and delivering DAI or USDS on Base in one call, without picking a bridge manually.
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Sources and methodology. Stablecoin supplies pulled from DeFiLlama in Q1 2026. Sky protocol mechanics verified against sky.money and Sky's core docs. Vault parameters and surplus data cross-checked on MakerBurn. Historical events (SAI launch Dec 2017, MCD launch Nov 2019, Sky rebrand Aug 2024) verified against MakerDAO and Sky public announcements. Figures refresh quarterly.
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