CoinClear

DAI (MakerDAO / Sky)

6.8/10

DeFi's original decentralized stablecoin — increasingly reliant on real-world assets, navigating a confusing rebrand to Sky.

Updated: February 16, 2026AI Model: claude-4-opusVersion 1

Overview

DAI launched in December 2017 as the first decentralized stablecoin on Ethereum, created by the MakerDAO protocol. Users generate DAI by depositing collateral (initially only ETH) into Maker Vaults, which are overcollateralized smart contract positions. The system was revolutionary — a stablecoin without a centralized issuer, maintained through code and economic incentives.

Multi-Collateral DAI (MCD) launched in November 2019, expanding accepted collateral beyond ETH to include WBTC, stablecoins, and eventually real-world assets (RWAs). This expansion dramatically increased DAI's scalability but introduced centralization vectors. As of 2026, DAI's market cap sits around $5-6 billion. Notably, over 50% of DAI's backing now comes from RWAs — primarily U.S. Treasuries held through entities like BlockTower, Monetalis, and the Spark protocol — meaning the "decentralized" stablecoin is substantially dependent on traditional financial infrastructure.

In August 2024, MakerDAO initiated a rebrand to "Sky," introducing a new stablecoin called USDS and a new governance token SKY. DAI and MKR remain functional but the transition has created confusion in the community. The rebrand represents founder Rune Christensen's "Endgame" vision for the protocol's long-term evolution, which has been controversial.

Peg Stability

Historical Performance

DAI has maintained a generally stable peg but with more variance than centralized alternatives. During the March 2020 "Black Thursday" crash, DAI spiked to $1.10+ as a liquidity crunch drove demand for the stablecoin while collateral was being liquidated. In the 2022 bear market, DAI occasionally traded at $0.995-$0.998. The peg has generally improved over time as liquidity deepened, but DAI's peg mechanism is inherently more complex and slower to correct than centralized mint/redeem models.

Mechanism

DAI's peg is maintained through several mechanisms. The DAI Savings Rate (DSR) incentivizes holding DAI when demand is low (raising the rate) or spending it when demand is high (lowering the rate). Stability fees on Vaults create a cost of generating DAI, managing supply. The Peg Stability Module (PSM) allows direct 1:1 swaps between DAI and USDC, providing a hard floor/ceiling — though this also creates direct dependency on USDC. Liquidation of undercollateralized Vaults removes DAI from circulation during downturns.

Stress Testing

Black Thursday (March 2020) was DAI's worst stress test. Ethereum's price crashed 50%+ in hours, triggering mass liquidations. The auction system failed due to network congestion, allowing some liquidators to win auctions with $0 bids, creating a $5.4 million shortfall. MakerDAO conducted an MKR token auction to recapitalize. The system survived but exposed serious fragility in extreme conditions. Post-Black Thursday improvements including flash loan-powered liquidations and circuit breakers have strengthened the system.

Collateralization

Reserve Composition

DAI's backing is a complex mix of crypto assets and RWAs. The Maker protocol accepts ETH, WBTC, stETH, and other crypto assets as collateral, but RWAs now constitute the majority of DAI's backing. Key RWA vaults include U.S. Treasury allocations through BlockTower Andromeda ($1.5B+), Monetalis Clydesdale, and the Spark Tokenized Treasury facility. USDC in the PSM also constitutes a significant portion. This hybrid model provides stability but undermines decentralization claims.

Transparency

MakerDAO's on-chain transparency is excellent for crypto-native collateral — all vault positions, collateral ratios, and liquidation parameters are publicly verifiable in real-time. However, RWA transparency is murkier: real-world asset positions depend on off-chain legal structures, trustee arrangements, and third-party custodians that are not fully verifiable on-chain. The protocol publishes regular reports, and community members actively monitor positions, but RWA verification inherently requires trust in off-chain entities.

Over/Under Collateralization

Crypto-backed DAI is overcollateralized, with minimum collateral ratios ranging from 130% (stablecoins) to 170% (volatile assets). The effective system-wide collateralization ratio hovers around 140-160%. RWA-backed DAI is closer to 1:1 since Treasuries are near-par assets. The overcollateralization of crypto vaults provides a meaningful buffer against price declines, though Black Thursday showed this can be insufficient in extreme crashes.

Security

Smart Contract Security

MakerDAO's smart contracts are among the most battle-tested in DeFi, having secured billions of dollars since 2017 without a major exploit. The codebase has been audited by Trail of Bits, PeckShield, and others. However, the system is complex — multiple contract modules, oracles, auction mechanisms, and governance actions create a large attack surface. The protocol's governance delay (GSM) provides a timelock on changes, allowing the community to respond to malicious proposals.

Custodian Risk

For crypto collateral, custodian risk is minimal — assets are held in smart contracts. For RWAs, custodian risk is significant: real-world assets are held by third-party trustees, custodian banks, and asset managers operating under legal agreements that may not be enforceable in all jurisdictions. A failure of a major RWA custodian could impair DAI's backing.

Operational Security

MakerDAO's oracle system is a critical security dependency. The protocol relies on a set of oracle feeds to determine collateral prices for liquidations. Oracle manipulation or failure could trigger inappropriate liquidations or prevent necessary ones. The protocol uses a median of multiple oracle feeds with a one-hour delay to mitigate this risk.

Decentralization

Governance

MakerDAO is governed by MKR (and now SKY) token holders through on-chain voting. Governance proposals control all protocol parameters including collateral types, stability fees, debt ceilings, and oracle configurations. This is significantly more decentralized than USDT or USDC, but in practice, governance participation is concentrated among a few large holders and delegates. Rune Christensen and the Maker Foundation's successors retain outsized influence.

Censorship Resistance

DAI itself has no blacklist or freeze function — once minted, DAI tokens are freely transferable without restriction. This is a fundamental advantage over USDT and USDC. However, the growing reliance on USDC (via the PSM) and RWAs means the protocol's collateral can be frozen by third parties. If Circle blacklisted Maker's PSM contract, it could destabilize DAI. The protocol has discussed "emergency shutdown" procedures for such scenarios.

Regulatory Exposure

MakerDAO's RWA exposure creates regulatory surface area that pure crypto-collateral would avoid. The protocol's U.S. Treasury holdings are subject to U.S. regulatory jurisdiction. The Endgame plan acknowledges this and envisions a potential "de-risk" path where the protocol could pivot back toward crypto-native collateral if regulatory pressure intensifies, though this would reduce DAI's scalability.

Adoption

Market Cap & Velocity

DAI's market cap of ~$5-6 billion places it as the third or fourth largest stablecoin. While dwarfed by USDT and USDC, DAI punches above its weight in DeFi. The introduction of USDS alongside DAI has fragmented adoption somewhat, with users uncertain which to hold. The DAI Savings Rate has attracted significant deposits, driving demand.

DeFi Integrations

DAI is integrated into virtually every major Ethereum DeFi protocol: Aave, Compound, Uniswap, Curve, and hundreds of others. It serves as a foundational asset in the DeFi ecosystem. Spark Protocol (formerly Spark Lend), MakerDAO's lending frontend, has grown rapidly. DAI's lack of a blacklist function makes it preferred in censorship-sensitive DeFi applications.

Cross-Chain Presence

DAI is available on Ethereum and major L2s (Arbitrum, Optimism, Base) as well as other chains via bridging. However, native DAI issuance is limited to Ethereum, and bridged DAI carries bridge-related risks. Cross-chain presence is moderate compared to USDT and USDC, which have native issuance on many chains.

Risk Factors

  • RWA centralization: Over 50% of backing from real-world assets undermines decentralization and introduces counterparty risk.
  • USDC dependency: The PSM creates a direct dependency on Circle — if USDC depegs or Maker's PSM is blacklisted, DAI suffers.
  • Rebrand confusion: The MakerDAO-to-Sky rebrand and DAI-to-USDS transition has confused users and fragmented liquidity.
  • Governance concentration: Despite being a DAO, governance participation is concentrated among a small number of large holders.
  • Oracle risk: Price oracle manipulation or failure could trigger cascading liquidations or prevent necessary ones.
  • Black Thursday recurrence: Extreme market conditions could again overwhelm the liquidation mechanism despite improvements.

Conclusion

DAI represents the most successful attempt at a decentralized stablecoin, and its track record since 2017 is impressive. The protocol has secured billions without a major smart contract exploit, introduced groundbreaking DeFi primitives (CDPs, flash liquidations, on-chain governance), and demonstrated that a stablecoin can function without a centralized issuer — at least partially.

However, the evolution from pure ETH-backed DAI to a hybrid stablecoin backed predominantly by RWAs and USDC has fundamentally altered the decentralization thesis. DAI today is arguably a wrapper around U.S. Treasuries and USDC with some crypto collateral mixed in. The Endgame rebrand to Sky and USDS has added confusion without yet delivering clear benefits.

The score of 6.8 reflects DAI's strong position as the most decentralized major stablecoin, tempered by the reality that its decentralization is eroding. It scores well on security (battle-tested contracts) and reasonably on collateralization (transparent on-chain + RWA), but the trend toward centralized backing is concerning for those who value DAI's original vision.

Sources