The Giveth community is thrilled to announce that our DApp (currently in beta) now supports payments in the form of the Dai stablecoin, thanks to a generous €10,000 grant from the MakerDAO Community Development Fund.
As an organization dedicated to social impact, it’s important that our platform offers real-world users a practical tool for receiving and managing funds. The price of ether is unreliable, and holding onto it for extended periods of time is not something that our nonprofit users are particularly keen to do. These organizations have no interest in playing the markets, they just want to make an impact, and they share our belief that cryptocurrency can help them do that. Now that Dai payments are an option, our DApp can more meaningfully support the important work they do.
The €10,000 grant that MakerDAO Community Development Fund gave to support this integration was divided into €5,000 worth of ETH and €5,000 worth of DAI. With the reward denominated partly in Dai, we had a built-in incentive to get the work done: we were literally unable to collect the reward until we integrated the token into our platform. This technically succinct strategy may be worth keeping in our incentive toolkit for use in other contexts.
Dai is not the only stablecoin out there, of course, so how did we choose it? One of Giveth’s long term goals is to weed out all instances of centralization in our systems, and we consider Dai the most decentralized of all the viable stablecoins out there. This is for two reasons: first, Dai are minted through a mechanism that any ether holder can use, and second, the reserves of ether that back the global supply of Dai are not under a single party’s control.
Dai’s inner workings are complicated, but its value is essentially based on other cryptocurrencies (just ETH for the time being) that get stored in a smart contract-based system. Anyone (or any bot) can use this system to create a “Collateralized Debt Position” (CDP) by staking ether and then withdraw a limited amount of Dai against those deposited funds. This act of withdrawing the tokens is what actually creates them.
As market fluctuations move the price of Dai above $1, CDP creators are incentivized to create more tokens and sell them on the open market until the price moves back towards $1. When the value dips below the $1 mark, these same CDP creators are incentivized to buy Dai at the sub-dollar rate and use those tokens to partially or entirely pay down the debts on their CDPs, essentially burning coins until the reduced supply causes prices to creep back towards $1. By contrast, most other prominent stablecoins are held steady by reserves of currency that are in the custody of financial institutions.
Obviously, if ether goes to zero, Dai will lose its peg. After all, its value is tied directly to ether’s. But barring a sustained drop that is catastrophic in both speed and severity, we expect Dai users’ funds to be protected.
This is because we’ve examined the system up close: the White Hat Group team that audited MakerDAO’s smart contracts was made up of Jordi Baylina, Barry Whitehat, and Griff Green, all Giveth co-founders; Adrià Massanet, a frequent Giveth contributor who, among other things, organized the Reperkutim musical initiative; Eduardo Antuña, who built our Wall of Fame and is the developer lead on the DAppNode project; Quazia, a former Social Coding lead who helped start the Aragon DAC; and Antoni Martín, a founding member of iden3, a Giveth Galaxy project. Giveth is confident in MakerDAO’s tech and we’re excited to be able to finally offer a stablecoin option on our platform.
Seeing results already
Since integrating Dai around Christmas 2018, we’ve already seen more Milestone payments come across our bridge in Dai than in ether. And we’re only getting around to actually announcing the change now, which means that this ratio will probably slant even more strongly towards Dai in the weeks to come.
BrightID recently became the first Giveth Galaxy initiative to receive a donation of over 10,000 DAI, and some of these funds have already been paid out to BrightID team members for work that they’ve done. Members of the Giveth DAC also recently voted to denominate reward and expense payments (except for RewardDAO) in Dai. And around the time of the integration, the Aragon DAC also expressed their faith in the token by converting all their ether to Dai.
Again, we’re super stoked because we believe Dai payments will make our platform a stronger tool in the hands of our nonprofit users. But combining the Giveth DApp with Dai also offers another exciting possibility: it gives users a way to test new blockchain-integrated governance models — models that exist mostly or only in theory — using real money that’s stable in value.
We can’t thank the folks at the MakerDAO Community Development Fund enough for making this happen, and we look forward to lots more Dai payments in the near future!
Until next time,
The Giveth DAC, the team of people working on the DApp and many other Galaxy projects, is funded through the DApp. We depend on Givers like you: individuals who want to help us to make the World a Better Place. If our mission speaks to you, go to donate.giveth.io or contact any of the Unicorns on Riot, and tell us how you’d like to contribute. ❤
Interested in joining us? Talk to us on Riot about how you can help!
Fork our code on Github