What is DAI, and what backs it?

DAI is a stablecoin that aims to stay worth one US dollar. It is issued by smart contracts on Ethereum rather than by a company holding cash in a bank. The protocol behind it was built by MakerDAO, which rebranded as Sky in 2024.

What type of stablecoin is DAI?

DAI began as a crypto-backed stablecoin. Users lock crypto in a vault and borrow newly created DAI against it, much like a secured loan. The vault must hold more collateral than the DAI it creates.

If the collateral's value drops too far, the vault is liquidated. The protocol takes over the collateral and sells it in an auction to cover the debt, plus a penalty. Borrowers also pay an ongoing charge called a stability fee.

DAI is not a fiat-backed coin like USDC or USDT, which are compared in USDT vs USDC. But over time it has come to depend heavily on assets that sit outside the blockchain.

What is DAI backed by?

DAI has three main sources of backing:

• Crypto in vaults. Assets such as ether and wrapped bitcoin, locked by borrowers.
• USDC. A peg stability module lets users swap USDC for DAI, and back, at a fixed rate set by governance. This helps hold DAI near one dollar, and the USDC stays in the protocol.
• Real-world assets. Tokenized US Treasury bills and similar holdings, managed through outside partners.

In early 2026, real-world assets made up about 40% of the backing behind DAI and USDS, USDC about 38% and crypto in vaults about 22%, according to a comparison published by Spark. The mix changes as governance shifts allocations. Spark notes that roughly 78% of the backing depends on USDC or real-world assets, and that the real-world portion relies on off-chain trustees rather than collateral anyone can check on the blockchain.

What happened to MakerDAO and DAI?

On August 27, 2024, MakerDAO announced it was rebranding as Sky. It introduced two new tokens that launched that September:

• USDS, an upgraded stablecoin. A converter swaps DAI and USDS one for one in both directions with no fee, and Sky's documents say fees cannot be added to that route.
• SKY, the new governance token. Each old MKR token could be converted into 24,000 SKY.

The upgrade was optional, and DAI and MKR remained in use. Sky's documents say governance is moving from MKR to SKY and that conversion is becoming one-way, from MKR to SKY only.

Holders of USDS can deposit it to receive sUSDS, a token that earns the Sky Savings Rate. Sky's documents say depositing and withdrawing carries no fees.

Who controls DAI?

Holders of the governance token vote on collateral types, fees, the savings rate and other settings, which makes Sky a type of DAO. There is no bank account and no promise of redemption from a company. DAI keeps its value through collateral, liquidations and the USDC swap module, and none of it is covered by deposit insurance.