An impressive system built on top of Ethereum that produces a digital asset that is soft pegged to the USD using an incentive system.
The core system allows any user to mint Dai tokens using other crypto assets as collateral. The Dai tokens are debt, and are analogous to US dollars in that sense. Dai tokens have value because they can be used to pay debt owed in Dai.
The amount of Dai tokens you mint is determined by the value of the crypto assets you lock as collateral. For example, if you lock $150,000 in ETH tokens, you can mint up to 100,000 Dai tokens. You accumulate additional Dai debt on a per-second basis. You cannot withdraw your ETH until you repay the Dai debt. If your Dai debt exceeds a threshold, your ETH is put up for a liquidation auction to pay off the debt.
This system is analogous to a bank issuing US dollars backed by collateral such as a house or stock, but unlike the banking system, anyone can issue debt based money.
There is currently $6.5B of crypto asset value locked in the protocol, $1.95B Dai tokens have been issued, and the governance token associated with the project is valued at a $2.5B market cap.