I'm fully aware of that. What I would like to know is the mechanism that links Dai in any way to USD. So far, I've been told the onus on me is to research it, and then that my conclusions from that research are wrong.
If you spent as much time reading and internalizing the whitepaper as you did arguing about it online you'd be there already. I know I'm being snarky, but you're coming of as trollier and trollier. This is not Reddit.
I read the materials, and I still can't figure it out. You have also done your research, and apparently do know why Dai is stable to the USD. I'm just curious what that mechanism is, and why you can't explain it. I did read your very long answer elsewhere, but that's an overview of the entire Maker system, and at no point does it explain which part does the "stabilizing", apart from a vague reference to "incentives". What are they?
Oversimplifying a bit here at the price of accuracy and completeness, but mainly arbitrage. Ceiling is easy; if the market price is > 1$, it is free money to create new CDPs and sell the DAI off for ETH on the market.
If the ETH/USD price goes down, so does the capitalization ratio of CDPs. If a CDP goes low enough, users have to either repay their DAI debt (removing DAI supply from market) or rebalance by depositing additional ETH collateral. Otherwise, their position will be liquidated (which means the CDP owner loses their collateral) and their ETH collateral is put up for public sale for DAI on-chain. The DAI used to pay at these sales is destroyed. This creates an incentive for people to burn DAI to acquire ETH below market price (thus creating demand for DAI).
Also in general I advise you to ask clarifying questions rather than post scoffy dismissals if you know that your understanding might be incomplete.
If you have an adversarial mindset (which is absolutely healthy) and want to understand it well enough to not immediately come up with counterarguments whose only valid reply is "RTFM", yes, it takes at least 20 minutes. But regardless, I'll bite.
DAI has a couple of intended use-cases. I will focus here on the "stable coin" asset, meaning you should be able to expect it's value to not go up or down over time. It is inherently debt.
The main component of DAI is "CDPs", Collateralized Debt Positions. There is a smart contract on the ETH blockchain. Smart contracts are computer code on the blockchain that are "open trustless execution", meaning you can inspect the source code, verify that it matches the deployed bytecode, and be certain that any transaction follows the rules. In DAI, there is no entity that can even theoretically exit-scam you.
The configuration parameters of this smart contract is set by votes by the holders of the MKR token. This token is traded on public markets and is the speculative token of the ecosystem.
You can deposit assets into this smart contract. The current version of DAI only takes ETH, but the intention is that MKR holders will consider any significant asset representable on the ETH blockchain. This includes other stablecoins (think fiat-backed tokens), tokenized equity or government bonds (which have already been issued on the ETH blockchain), tokens backed by commodities like gold, etc.
When you deposit assets into the smart contract, you get DAI in return, representing a loan backed by the deposited assets. How much DAI you get in return is determined by an oracle (meaning a smart contract providing data external to the blockchain). This oracle is aggregated from several other oracles, similarly public and approved by the MKR governance. In general, the system is over-collateralized at any point in time.
There is an incentive and liquidation system around the whole things that goes a bit further to ensure that the price remains stable despite fluctuations - and so far the DAI/USD price has remained really close to 1 throughout the ETH/USD long bleed of 2018, including short periods of high volatility.
There is some degree of risk involved of course, most notably including the oracle price feeds. There is a road map to both increase transparency and decrease the possibility of collusion between oracle providers.
There is also the "emergency shutdown", which involves freezing and instant liquidation, but this comes at a big cost to the MKR holders who have to approve it.
Despite having been running for several years and having dozens of people (I think over 100 now?) it is, of course, still to a large part an experiment that is still evolving. But so far it has been performing better than I thought. And there is no way you could call it a scam.
No, did you even read what he wrote? Price feeds are used in the system, but the whole system does not boil down to "price feeds". I am not even sure what that could mean.
Price feeds are the answer? The price feeds in question don't even track the price of Dai - so I am not even sure what mechanism you have thought up to explain to yourself how Maker works.
If you are still having trouble understanding the system there is no shortage of resources available. Of course if you dismiss the resources because of an anti-cryptocurrency bias as you have then you will end up clueless since this is a realm with low-coverage in the mainstream.
I've read the previous, very long, answer. Yes, it explains how the Maker system works, but it does not explain which parts constitute the Dai to USD peg. The price feeds track the price of Eth, which is used to set the price of Dai if automatic settlement is needed (something I learned from the resources you describe!). If that doesn't set the price of Dai, then what does? Are you suggesting it's an emergent behavior of the system as a whole?
When someone's ethereum CDP is liquidated onto the market it is auctioned off for Dai before the collateral no longer backs the Dai. The price feed determines when a CDP is in need of liquidation. This mechanism is important because it keeps the system overcollateralized.
There is also something called global settlement. This is for major upgrades (they are doing one on the 16th) and also in case of emergencies. The price feeds in this case are used to determine Dai holder's proportional claims to the collateral (using the target price 1 Dai = 1 USD). It may happen happen Dai holders get less or more depending on the circumstance. In addition Maker is a major Ethereum application so if it failed the price of Ether would tumble. That is part of the reason they are expanding to support more collateral types in the update slated for the 16th.
So every Dai is a rough promise for one dollar but that does not answer why Dai is stable day to day. It works like this: When the price of Dai falls under 1 dollar, CDP owners will buy it up and close their positions at a discount which will put upward pressure on the price. Likewise, if the price of Dai goes above one dollar then fresh CDPs will be opened and fresh Dai will be sold on to the market, putting downward pressure on the price. If that isn't enough, the interest rate is manually adjusted to fine-tune the supply.
In the future part of the interest will be payed in to an optional savings account for Dai holders. The idea is that by adjusting the APR the demand for Dai can be fine-tuned. When rates are high people will buy Dai and lock in in a savings account. If demand is too high rates can be lowered causing an inverse affect.
DAI is a complex series of loans, borrowing, and interest that creates incentive to sell your DAI if it goes over $1 and incentive to buy if it goes below $1. DAI has basically maintained $1 for years even as ETH prices have been all over the place. It's battle tested. If you can't be bothered to do a few minutes of research on a complicated topic I don't know what you're doing here.
So far, I have a 20-minute video that is clearly mostly not about the Dai peg, and a link to a very wordy "paper". I skimmed both, and the answer is apparently "oracles", or a price feed from several crypto exchanges. That's a really simple answer, that doesn't need burying in layers of cryptobabble and an attitude that I can only describe as condescending.
It is very good to be critical about the value of information others provide.
But I find your commenting style abrasive; I wouldn't be surprised to see you flagged if you continue with it (especially with multiple examples in a single thread). Occasional outbursts seem to be tolerated here, although frowned upon as unconstructive. I myself personally tend towards abrasive confrontation of facts; but I really value the rules here since they create good discourse and avoid discord.
