DAI is the first decentralized secured cryptocurrency trying to keep a stable 1: 1 against the US dollar by locking other crypto assets into contracts.
This means that, unlike other asset-backed cryptocurrencies that can be issued by for-profit companies, DAI is an open source software product called Maker Protocol, a decentralized application running on the Ethereum blockchain.
Accordingly, DAI maintains its value not by being secured in US dollars held by the company, but by using secured debt denominated in the Ethereum cryptocurrency.
The Maker protocol, through smart contracts running on Ethereum, enables borrowers to block ETH and other crypto assets, and thus securing them, in order to generate new DAI tokens in the form of loans.
If borrowers want to recover blocked ETH, they will have to return the DAI to the protocol and pay the fee. In the event of liquidation, the Manufacturer's Protocol will take over the security and sell it using the internal market auction mechanism.
Due to its design, the DAI supply cannot be changed by any party on the web. Rather, it is held through a system of smart contracts designed to dynamically respond to changes in the market price of the assets under contract.