Facts About CDAI
cDAI (Compound DAI) is not a standalone coin; it’s a type of interest-bearing token used on the Compound Finance platform. Compound Finance is a decentralized lending and borrowing protocol built on the Ethereum blockchain. cDAI represents an interest-bearing version of the DAI stablecoin. Here’s more information about cDAI and how it works:
Owner: Compound Finance is the platform responsible for cDAI. Compound is a decentralized autonomous organization (DAO) where decisions regarding the protocol are made collectively by its users.
Uses: cDAI is used within the Compound Finance ecosystem for lending and borrowing. Users deposit DAI into the Compound protocol, and in return, they receive cDAI, which represents their deposit plus interest. cDAI holders can use these tokens as collateral to borrow other assets on the platform or redeem them for the underlying DAI.
Seed Sale: Compound Finance distributed cDAI to users as a part of its lending and borrowing platform. There was no initial seed sale or ICO.
Working Principles: When you deposit DAI into the Compound protocol, it begins earning interest. The interest generated by the assets supplied to the protocol is distributed to cDAI holders pro-rata. This means that as time passes, the amount of cDAI you hold will increase due to earned interest. cDAI can also be used as collateral to borrow other supported assets on the platform.
Limitations: The value of cDAI is pegged to the value of DAI, which is intended to be stable at $1. While cDAI holders earn interest, this interest is subject to market fluctuations and the overall health of the Compound protocol. If the protocol encounters issues or vulnerabilities, it could impact the value and security of cDAI.
Current Value: cDAI should maintain a value close to $1, but its interest-earning capability will result in slightly more than $1 over time. You can check the current value of cDAI on various cryptocurrency data platforms or DeFi applications.
How to Buy and Sell cDAI: cDAI can be obtained by supplying DAI to the Compound platform. When you supply DAI to Compound, it will automatically convert your DAI into an equivalent amount of cDAI. To convert cDAI back to DAI, you simply withdraw your assets from the Compound platform.
It’s important to note that Compound Finance is an established DeFi platform within the Ethereum ecosystem. However, as with any DeFi investment, there are associated risks, including smart contract vulnerabilities and potential market volatility. Ensure that you understand how the protocol works and the risks involved before participating.
