Turning DAI into a Global Currency: Using DAI as the Medium of Exchange of Choice for On-chain Financial Transactions on OpenLaw
One of the reasons that the US Dollar supplanted gold as a global standard is because most global contracts are denominated in U.S. Dollars. For blockchain-based digital assets to achieve their vision of serving as a global, universal available “currency,” a digital asset must not only be stable, but also be primarily used to settle commercial transactions in both the financial and non-financial realms.
In the Ethereum community, great strides have been made in solving stability issues with native protocol level assets, like Ether. These “stablecoins” hold out the hope of making blockchain-based commerce transactions more accessible to parties that may be reluctant to expose themselves to token-based price volatility in commercial transactions.
The first and major stablecoin to emerge is MakerDAO’s Dai, which achieves stability by being tied to the value of underlying digital assets. Today stablecoins are primarily used for margin trading of digital assets, but that is just the beginning. With OpenLaw Finance, stablecoins can be used to settle real-world transactions and can be denominated in contracts.
To that end, we’ve integrated Dai into OpenLaw Finance to show how Dai can be used as the medium of exchange for legally compliant tokenized securities, fixed income products, tokenized real estate, and smart derivatives. As a result, anyone can now manage their blockchain-based financial transactions using OpenLaw’s open-source tools. Dai can continue its path towards achieving a status as a global currency.
OpenLaw Finance “Smart” Transactions Using Dai
Below is an example of how anyone can create a “smart derivative” such as an interest swap agreement. For some background, an interest rate swap is an agreement between parties to exchange interest payments for another over a set period of time (such as a fixed or floating interest rate).
Using OpenLaw’s markup language, we were able to take a generic interest swap agreement and then automatically calculate payments using Dai based on the notional amount, the actual number of days, and interest rates. The recurring and fixed payments were represented in functions found in an Ethereum smart contract, giving the parties the option to receive payments under the agreement in Dai every minute, day, week, month, or year.
Dai brings utility to “smart derivatives” such as an interest swap agreement and gives users the ability to settle real-world transactions without friction and volatility. “As a medium of exchange, Dai can be used in a variety of ways,” said Greg Di Prisco, Head of Business Development at MakerDAO“In the same way that the US Dollar is a standard currency in global financial contracts, we believe that Dai can be a standard currency of financial contracts on the blockchain”
OpenLaw opens the door for a more streamlined and efficient traditional financial system. “OpenLaw Finance offers a customizable and flexible platform to create and manage any financial transaction involving digital assets and Dai.” says Aaron Wright, co-founder and CEO of OpenLaw.
The OpenLaw Finance platform not only enables the creation and execution of smart derivative transactions, but it also allows parties to generate and manage security tokens, fixed income products (like bonds and other debt instruments), commodities like carbon credits, and others.
OpenLaw, along with MakerDAO’s Dai, gives anyone the ability to generate and manage the issuance of tokens in financial transactions, integrate stablecoins, and plug into Ethereum-based exchanges. This advances traditional financial institutions' ability to improve their processes and integrate blockchain-based solutions for their clients.
OpenLaw is a blockchain-based protocol for the creation and execution of commercial systems. Using OpenLaw, financial institutions and startups can more efficiently engage in the end-to-end commercial process in a highly secure and efficient manner, all while leveraging next-generation blockchain-based smart contracts.
To learn more about OpenLaw, check out our site and documentation for an overview and detailed reference guides. You can also find us at firstname.lastname@example.org or tune in in our community Slack channel. Follow our Medium and Twitter for further announcements, tutorials, and helpful tips over the upcoming weeks and months.
About MakerDAO DAI
MakerDAO is a decentralized organization dedicated to bringing financial stability and transparency to the world economy. Its purpose is to create an inclusive platform for economic empowerment.
MakerDAO enables the generation of Dai, the world’s first unbiased currency and leading decentralized stablecoin. Dai eliminates volatility through an autonomous system of smart contracts called the Maker Protocol and decentralized community governance. MakerDAO strives to unlock access to the global financial marketplace for all.
OPENLAW IS OPERATING ON A TEST ENVIRONMENT. NO SECURITIES OR VIRTUAL CURRENCIES ARE CURRENTLY GENERATED FROM OR EXCHANGED ON OPENLAW FINANCE.