What is Sai (SAI)? Sai (single-collateral DAI (SCD)) is a stablecoin pegged to the US dollar that maintains its peg due to collateralized debt positions (CDPs) created through smart contracts on the Ethereum blockchain. Sai differs from other stablecoins in the sense that it is fully decentralized and does not rely on trust as is the case for other stablecoins.
A person can create SAI by locking at least 1.5 times the amount of ETH in a CDP and they must maintain this ratio to prevent the liquidation of the CDP. For example, if a user locks $100 of ETH they can generate up to $66.66 of SAI. The person can then reclaim their ETH by paying the SAI back plus a stability fee. This SAI is then destroyed and removed from circulation.
The stability fee is a tool of Sai’s decentralized monetary policy. When the price of Sai drops below $1, increasing the stability fee makes creating Sai more expensive, which should lower the supply of Sai, which drives up the price. When the price of Sai exceeds $1, decreasing the stability fee makes creating Sai less expensive, which should increase the supply of Sai, which lowers price. The stability fee is not centrally decided, but decided by the votes of MKR (Maker’s governance token holders).