[ajiang]

I think the defense of "nothing has happened yet" is a tough one to back, in particular given that during the build up to the last recession, 1) collateralized debt was claimed by wall street to be "as good as cash" and 2) the housing market would "always go up". It works until it doesn't.

[chrisco255]

DAI is set up so that it's not dependent on ETH always going up. People create DAI by locking up ETH (or in the future, other assets) as collateral. Currently for ETH, you have to lock up 150% of the value that you take out in DAI (but you can collateralize higher than that if you like). If the price of ETH falls below a certain value, then a position can be liquidated automatically by the system, to cover the position.

DAI has a goal of adding additional forms of collateral in the future. One could see a coin like DAI being backed by a mix of Gold, real estate, commodities, or securities to achieve greater stability.