Is DAI safe?
DAI has held close to $1.00 through multiple crypto crashes, including the 2020 'Black Thursday' event where it briefly traded near $1.11 due to liquidation failures. It is now majority backed by real-world assets, mainly short-term Treasuries, via Sky (formerly MakerDAO), which cuts crypto-collateral volatility but adds counterparty and governance risk that the original design was built to avoid.
The original model: overcollateralised crypto vaults
DAI is minted when users lock collateral — historically ETH and other crypto assets — into vaults at a required ratio above 100%, often 150% or more. If collateral value falls too far, the position is automatically liquidated to protect the system. This makes DAI solvent by construction as long as liquidations execute correctly and collateral is liquid enough to sell.
That mechanism failed briefly on 'Black Thursday' in March 2020: an ETH price crash combined with network congestion meant some liquidation auctions cleared at near-zero bids, leaving the system undercollateralised by about $4M until Maker's governance token holders recapitalised it through a debt auction.
The shift toward real-world assets
Since 2022, a growing share of DAI's backing has moved into tokenized short-term US Treasuries and other real-world asset vaults rather than pure crypto collateral. This reduces the liquidation risk that caused Black Thursday, but it reintroduces something the original design avoided: reliance on off-chain custodians, legal wrappers and the creditworthiness of RWA counterparties.
The rebrand to Sky and the new USDS token in 2024 formalised this direction, alongside a 'Sky Savings Rate' that passes Treasury-linked yield to holders who opt in.
Where the real risk sits today
DAI's peg risk today is less about crypto collateral crashing and more about governance decisions — which RWA vaults to approve, how much real-world exposure to take on, and how quickly governance can react to a counterparty problem. That is a slower-moving, more political risk than a liquidation cascade, and it is harder to monitor from outside.
Frequently asked
- Is DAI decentralised?
- Less than it once was. The original all-crypto-collateral design was fully on-chain and permissionless; the current RWA-heavy backing depends on off-chain legal structures and custodians approved by governance.
- Has DAI ever depegged?
- Yes, most notably to around $1.11 in March 2020 during 'Black Thursday', driven by failed liquidation auctions rather than a collateral shortfall that persisted.
- What is USDS and how does it relate to DAI?
- USDS is Sky's newer token, launched in 2024 as an upgraded version of DAI with an optional native savings rate. DAI still exists and remains convertible with USDS.
- Can DAI be frozen like USDT or USDC?
- No individual DAI balance can be frozen by a central issuer the way fiat-backed tokens can — DAI has no blacklist function. Governance can still change collateral parameters that affect the whole system.