Since its creation, cryptocurrencies have had several applications and the underlying technology (the blockchain) is here to stay. In this context, Latin Americans grasped the importance of cryptocurrency at an early stage. Many people currently use DAI, which has many uses due to its versatility, but highlights its ability to protect savings and fight inflation.
For Latin Americans, the true safe haven currency is the US dollar. Buying isn’t always easy, this is where MakerDAO’s Stablecoin Dai comes in. Dai, built on the Ethereum network and supported by a decentralized system of smart pricing and contracts, is designed to maintain a flexible link with the US dollar. In recent years, Dai and other “crypto-dollars” devoid of Bitcoin’s volatility have gained ground in Latin America, especially in Brazil, Colombia, Venezuela and Argentina.
And it is that, in the face of economic hardship, hyperinflation and capital controls, many people in Central and South America started turning to Bitcoin as economic conditions worsened in 2015. Its limited supply and resistance to censorship made Very attractive bitcoin. However, its volatility prevented it from becoming a reliable store of value on a daily basis.
The Crypto-Dollar of Latin America
The case for cryptocurrency adoption in Latin America has long been powerful. The region has been severely hit by inflation since the 1980s debt crisis and while some countries have managed to control their currencies, others are experiencing new problems.
This is the case of Argentina and Venezuela, to name just one example, with their inflation problems. What makes residents continue to be wary of their coins. In this context, with such a clear need for a stable currency to protect the value of citizens’ savings, Dai has become an attractive store of value.
Dai is widely marketed in Argentina thanks to the adoption of the Community
Dai’s momentum was steadily building in Argentina ahead of the coronavirus pandemic, which sent the economy and currency into free fall. In early 2020, only one exchange in the region offered Dai; today there are six. Dai has gained incredible traction, a remarkable achievement, as he was barely known in the country two years ago.
Especially in Argentina, where the country’s 12-month inflation rate was above 40% in mid-August. Dai has become a popular store of value, at least for the people. Dai is not yet widely used for everyday shopping such as grocery shopping because more adoption is yet to be done. But people store their savings in Dai and then convert their Dai into their local currency when they need it.
However, although some national currencies are very stable and desirable, they are not always easy to access. Dai, however, can be bought on various exchanges or generated from various forms of crypto collateral by anyone, and thus easily saved or transferred anywhere in the world.
As a decentralized user-created stablecoin, Dai does not have a centralized issuer or administrator. As long as users keep their Dai in a software wallet, such as Metamask, they retain complete and independent control of their funds.
Due to its decentralized nature, it is resistant to censorship as no entity has full control over the network. This quality is highly valued by those who need to send remittances to other countries or structure deferred payments.
Essentially, Dai are backed up in ETH and thus get stability that the rest of the other crypto assets don’t. In this way Dai does not lose value and is better able to resist strong market fluctuations.