Topic: DAI stablecoin Stabilize Mechanism, anyone can simplify it? (Read 130 times)
As far as i know this can be called decentralized leverage trading, but if it's for loan the words "would have an ability to recapitalize" don't mean that people would do so, but people have the right to do so or either to forfeit the collateral. The rest sentences are nonsense for me but maybe paying your loan with DAI is the same as buying ETH which means increasing demand of ETH that would increase its price.
"Dai initially launched with support for only one collateral, which was Pooled Ether, also known as PETH. In order for users to obtain PETH to use as collateral for a CDP, they first had to deposit their ETH into a smart contract that pools ETH, which then gave them the equivalent amount in PETH. The purpose of using Pooled ETH was so that if the market for ETH crashed, the CDP would be able to retain a higher value of collateral than debt. If ETH crashed, the debt in a CDP would be worth more than the collateral held. Maker would then have the ability to recapitalize the market by automatically decreasing the supply of PETH, which would increase demand and, in turn, increase the price of Dai. This then increases the value of the collateral in a CDP and decreases the overall value of debt."
I am confuse with this part
So for example, ETH is $100 now
A deposit 1 ETH, got 100 DAI
B deposit 2 ETH, got 200 DAI
So market crashed, ETH is now $50
If A wanted to get back his collateralize 1 ETH, he would need to pay 100 DAI ($100)
If B wanted to get back his collateralize 2 ETH, he would need to pay 200 DAI ($200)
Why would they pay back when their current DAI is worth more than their collateralize loan?
Then, i am confused on why "Maker would then have the ability to recapitalize the market by automatically decreasing the supply of PETH, which would increase demand"
If the supply is decreasing, it's still the same isn't it? If the price of ETH drop by half, no matter how much supply is deducted, no point swapping DAI back to ETH?
If you use DAI, kindly help
Never really uses any Stablecoin but i know DAI is one of the best stablecoin there because it is decentralized and program coded
Thanks and regards
I am confuse with this part
So for example, ETH is $100 now
A deposit 1 ETH, got 100 DAI
B deposit 2 ETH, got 200 DAI
So market crashed, ETH is now $50
If A wanted to get back his collateralize 1 ETH, he would need to pay 100 DAI ($100)
If B wanted to get back his collateralize 2 ETH, he would need to pay 200 DAI ($200)
Why would they pay back when their current DAI is worth more than their collateralize loan?
Then, i am confused on why "Maker would then have the ability to recapitalize the market by automatically decreasing the supply of PETH, which would increase demand"
If the supply is decreasing, it's still the same isn't it? If the price of ETH drop by half, no matter how much supply is deducted, no point swapping DAI back to ETH?
If you use DAI, kindly help
Never really uses any Stablecoin but i know DAI is one of the best stablecoin there because it is decentralized and program coded
Thanks and regards
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