...and why you should build on top of Plasma DAI.
DAI, the first decentralized stablecoin on the Ethereum blockchain has been a real game changer for the Ethereum ecosystem, especially in the midst of ETH price crash. DAI is pegged to the value of USD which means that every DAI is worth \$1, regardless of how much DAI is in existence. Moreover, due to the fact that DAI is backed by Ether locked in smart contracts called Collateralized Debt Positions (CDP), it cannot be shut down like other centralized stable coins, and can be freely traded and exchanged without middlemen like any other ERC20 token.
The Ethereum community could experience the potential of DAI first hand during ETHDenver, thanks to a simple xDai wallet created by Austin Griffith, director of research at Gitcoin. Every conference attendee received their own unique web wallet pre-loaded with a localcoin called buffiDai, pegged to DAI, and could immediately start participating in this transient crypto-economy by, for example, purchasing their hotdogs with buffDAI. The xDAI chain has demonstrated how fast and cheap transactions are an essential building block of cryptocurrency adoption.
Being big fans of DAI token ourselves, last week we enabled running DAI on Plasma chain, and the first plasma DAI transaction occurred on our mainnet.
Layer 2 scalability solutions create greater network security than sidechain solutions. Moreover, the advantage of executing the DAI transactions on a layer 2 solution such as Plasma - unlike in the case of simple sidechains such as POA’s xDAI chain - is the fact that wallet operators can benefit from the market making opportunity and create exit markets thanks to fast withdrawals. Even though in layer 2 exit duration is longer than on sidechains, wallet operators can think of business models to provide services to the users as they off board them to the mainnet. In general, utilisation of layer 2 solutions could prove essential in achieving mass adoption, as users will find a fast and more seamless experience when enrolling in decentralized services.