We’re excited to announce a working partnership with MakerDAO. Market makers are now trading the Dai stablecoin on AirSwap, creating a stable medium of exchange for decentralized marketplaces.
In Money and the Mechanism of Exchange, William Stanley Jevons analyzed money as a medium of exchange, a common unit of account, a standard of deferred payment, and a store of value. It has been challenged that crypto currencies do not fill these requirements, and in many cases, rightly so.
Without money, we have barter. This is to say that we could trade two of one thing for three of another, but as the variety of things we trade increases, determining their relative value is challenging. In the crypto space, with the increasing popularity of consumer tokens and collectibles, trades are often made directly between assets, but also often made in exchange for a base asset like ether, the native currency of the Ethereum ecosystem.
A stable medium of exchange
The challenge with ether as a base asset is its volatility. To price one asset against another that is constantly changing in relative value returns us to the confusing situation of barter. Additionally, if the relative value of assets change consistently, consumers are unnecessarily encouraged to either hold or spend the asset rather than use it as a medium of exchange.
If there were a way to represent a truly stable asset as an Ethereum token, that would surely be a boon to the entire ecosystem. The most stable, the United States dollar, has served as the world’s currency for many years at around two-thirds of official foreign exchange reserves. But to represent USD in the Ethereum ecosystem presents many challenges. Enter Dai.
Enter the Dai stablecoin
The Dai Stablecoin is a collateral-backed cryptocurrency whose value is stable relative to the US Dollar. Dai provides stable denominations for token trades, which are incredibly important for a decentralized marketplace like AirSwap.
From the whitepaper, “Maker is a smart contract platform on Ethereum that backs and stabilizes the value of Dai through a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and appropriately incentivized external actors.”
Having gone live on the Ethereum Mainnet in December, the MakerDAO team has shown consistent development and engagement with the community, and the DAI itself has consistently hovered around $1 as advertised.
Collaborating on a decentralized future
We share the vision that stable assets like Dai are essential to the future of the ecosystem. Decentralized trade, of any asset, benefits greatly from a stable medium of exchange. Consumer tokens and collectibles (NFT) are early use cases today, but even as we progress into a world of security tokens, assets like Dai will become incredibly powerful.
We’ve also been in ongoing conversation with the MakerDAO team, where their experiences and insights have contributed to the technical development of our protocols and marketplace systems. We’ll share more of these developments soon.