Single-Collateral SAI

Single-Collateral SAI, often referred to simply as SAI or Sai, was the initial implementation of the Maker Protocol's stablecoin, launched in December 2017. It was a collateralized debt position (CDP) system where users could lock Ether (ETH) into a smart contract to generate the SAI stablecoin. This design made it the first decentralized finance (DeFi) primitive to achieve significant adoption, providing a censorship-resistant, crypto-native stable asset. Its creation and redemption were governed entirely by the MakerDAO community through the MKR governance token.

The system's mechanics were relatively simple compared to its successor. A user would deposit ETH into a Vault (then called a CDP), which would be locked as collateral. They could then mint SAI up to a specific ratio of their collateral's value, known as the collateralization ratio. If the value of the ETH collateral fell too close to the value of the minted SAI, the position could be liquidated in a penalty auction to ensure the system remained solvent. This single-asset backing introduced significant systemic risk, as SAI's stability was directly tied to the volatile price of Ethereum.

SAI was officially shut down and migrated to Multi-Collateral DAI (MCD) in November 2019. The primary motivation was to mitigate the risks of a single collateral type. The new system allowed a diverse basket of assets—including Basic Attention Token (BAT) and later many others—to back DAI, dramatically improving its resilience, scalability, and decentralization. The migration was executed via a global settlement of the SAI system, after which users upgraded their SAI to the new DAI token on a 1:1 basis.

The legacy of Single-Collateral SAI is profound. It proved the core concept of an algorithmic, decentralized stablecoin was viable and served as a foundational proof-of-concept for the entire DeFi ecosystem. Its limitations directly informed the design of the more robust Multi-Collateral DAI system. Today, SAI is considered a historic artifact of DeFi's early development, with the term now primarily used to distinguish the original version from the current, multi-asset DAI stablecoin.

Single-Collateral SAI, officially known simply as SAI, was the original stablecoin issued by the Maker Protocol. The name is a direct, functional descriptor: it was a Dai token backed by a single type of collateral asset, initially only Ethereum (ETH). The term 'SAI' (釆) is an older Chinese character meaning 'to gather' or 'collect,' chosen to represent the concept of a collateral-backed asset. This naming distinguished it from the later, more complex Multi-Collateral Dai (MCD) system, which supports a diverse basket of approved assets.

The 'Single-Collateral' prefix was adopted retroactively by the community and developers to create a clear historical and technical distinction after the launch of Multi-Collateral Dai in November 2019. Before this upgrade, the asset was universally called Dai. The renaming convention serves a critical purpose in blockchain historiography and technical documentation, ensuring discussions about protocol mechanics, risk parameters, and smart contract interactions are precise when referring to the legacy system.

The evolution from SAI to MCD is a foundational case study in decentralized finance (DeFi) protocol upgrades. The naming shift underscores a key design philosophy: backward-compatible terminology. Users could continue calling the stablecoin 'Dai,' while the new, specific term 'SAI' allowed engineers and analysts to unambiguously refer to the obsolete smart contract suite, the SaiTap, SaiTub, and the unique Stability Fee mechanism that applied only to the ETH-collateralized version.

Single-Collateral SAI was a collateralized debt position (CDP) stablecoin pegged to the US Dollar, backed exclusively by Ether (ETH) as its sole accepted collateral asset. Users would lock ETH into a smart contract to generate SAI, a process that created a debt position which had to be maintained above a specific collateralization ratio. This initial, single-asset design was a deliberate choice to launch the protocol with a simple, battle-tested risk model before expanding to a multi-collateral system. Its creation marked a pivotal moment, proving that a decentralized, crypto-backed stablecoin could maintain its peg without a centralized custodian.

The launch and operation of SAI were governed by the MakerDAO decentralized autonomous organization and its native MKR token holders. Key parameters like the stability fee (interest on generated debt) and liquidation ratio were set through on-chain governance votes. This system introduced critical DeFi primitives: automated liquidations via collateral auctions to protect the protocol from undercollateralized positions, and the use of MKR as a recapitalization resource—where MKR is minted and sold to cover system deficits in extreme scenarios, a mechanism known as the debt auction.

SAI's primary limitation was its reliance on a single, volatile asset (ETH), which concentrated systemic risk. During periods of high ETH price volatility, the protocol faced liquidation cascades and collateral shortfalls. This inherent risk, coupled with growing demand for a more robust and flexible stablecoin, directly motivated the development of Multi-Collateral DAI (MCD). The successful launch of MCD in November 2019, which supported multiple asset types like Basic Attention Token (BAT) and later real-world assets, rendered SAI obsolete, leading to a formal migration and eventual shutdown of the Single-Collateral system.

Single-Collateral SAI (often called 'Sai' or 'Old Dai') was the first iteration of the Maker Protocol's decentralized stablecoin, operational from 2017 to 2019. It was a collateralized debt position (CDP) system where users could lock Ether (ETH) as the sole accepted collateral to generate the SAI stablecoin, which was soft-pegged to the US Dollar. This system was a foundational proof-of-concept for decentralized finance (DeFi), demonstrating how algorithmic stability could be achieved without a central issuer, but it carried significant systemic risk due to its dependence on a single, volatile asset class.

The core mechanism involved a user depositing ETH into a smart contract vault, known as a CDP. Based on a predefined collateralization ratio (e.g., 150%), the protocol would allow the user to mint and withdraw a corresponding amount of SAI. For example, with ETH at $200 and a 150% ratio, a user locking 1.5 ETH ($300 worth) could mint a maximum of 200 SAI. This SAI could then be used in other DeFi applications or traded. To retrieve their locked collateral, the user needed to return the same amount of SAI plus a stability fee, which accrued as interest on the debt.

Price stability was maintained through an automatic feedback mechanism. If SAI traded below its $1 peg on secondary markets, arbitrageurs were incentivized to buy the discounted SAI, use it to repay their CDP debt, and unlock their ETH for a profit. This burning of SAI reduced supply, pushing the price back up. Conversely, if SAI traded above $1, it became profitable to open new CDPs, mint new SAI, and sell it, increasing supply to push the price down. This process was entirely driven by market participants responding to economic incentives coded into the protocol.

The system included critical risk parameters managed by MKR token holders through decentralized governance. These included the Stability Fee (interest rate on debt), the Liquidation Ratio (the minimum collateralization level before a vault is at risk), and the Debt Ceiling (the maximum total SAI that could be minted). If a user's collateral value fell too close to their debt value due to an ETH price drop, their position could be liquidated by keepers, who would auction off the collateral to cover the debt, incurring a penalty fee for the vault owner.

Single-Collateral SAI was ultimately shut down and migrated to Multi-Collateral DAI (MCD) in November 2019. The upgrade was necessary to mitigate the concentration risk of relying solely on ETH, which made the system vulnerable to extreme market volatility. MCD introduced support for multiple collateral types (like BAT and later USDC vaults), a Dai Savings Rate (DSR), and enhanced risk management tools. The migration marked a major evolution from a single-asset prototype to a robust, multi-faceted monetary system.

Single-Collateral DAI (SAI), originally and colloquially known as just "DAI," was the first decentralized stablecoin issued by the Maker Protocol, exclusively backed by Ethereum (ETH) as collateral. Launched in December 2017, the SAI system allowed users to lock ETH in a Collateralized Debt Position (CDP) to generate the stablecoin, which was soft-pegged to the US Dollar. This initial, single-asset design was a foundational proof-of-concept for on-chain, collateral-backed stablecoins but introduced significant systemic risks tied directly to ETH's price volatility.

The architecture of SAI relied on a global debt ceiling and a single Stability Fee (interest rate) applied to all CDPs. Its risk parameters, including the Liquidation Ratio and Liquidation Penalty, were calibrated solely for ETH's market behavior. This monolithic structure lacked flexibility; the protocol could not dynamically adjust risks for different asset types or scale efficiently. Furthermore, the dependence on one cryptoasset made the system vulnerable to black swan events or prolonged bear markets in the Ethereum ecosystem, potentially threatening the stability of the DAI peg.

To address these limitations, the MakerDAO community executed a monumental upgrade in November 2019, migrating to Multi-Collateral DAI (MCD). This new system introduced support for multiple collateral types, beginning with ETH and Basic Attention Token (BAT). Each collateral asset is governed by its own set of risk parameters in a Collateral Type Module, allowing for tailored Stability Fees, debt ceilings, and liquidation ratios. This diversification fundamentally reduced systemic risk and enhanced the stability and scalability of the DAI stablecoin.

The migration was not merely technical but also involved a token upgrade. The old token was renamed SAI (often called "Sai" or "Single-Collateral DAI"), while the new token retained the DAI ticker. A formal migration process, facilitated by a Migration Contract, allowed SAI holders to upgrade their tokens 1:1 to the new MCD DAI. This event marked the transition from a pioneering but limited system to a robust, flexible, and community-governed decentralized finance primitive.

Single-Collateral Dai (SAI), often called 'Sai' or 'old Dai,' was the first iteration of the Dai stablecoin, launched in 2017 and backed exclusively by Ethereum (ETH) as collateral. Its design introduced core DeFi concepts like over-collateralization and autonomous stability fees via the Maker Protocol. However, its reliance on a single asset made it vulnerable to ETH price volatility and limited its scalability and risk diversification. This inherent limitation prompted the development of a more robust, multi-collateral system.

The SAI to DAI Migration was a coordinated, user-initiated process where SAI holders exchanged their tokens for the new Multi-Collateral Dai (MCD) on a 1:1 basis. This was facilitated through the official Migration Portal, which burned SAI and minted an equivalent amount of DAI. CDP (Collateralized Debt Position) owners were required to first migrate their debt and collateral—closing their SAI Vaults and opening new MCD Vaults—before they could mint the new DAI. The migration was incentivized by offering a DSR (Dai Savings Rate) exclusively to the new MCD system.

The Sunset of SAI refers to the formal shutdown of the Single-Collateral system after a multi-year transition period. Key sunsetting steps included disabling the ability to open new SAI CDPs, gradually increasing the stability fee (borrowing cost) on existing SAI debt to encourage migration, and finally triggering the Emergency Shutdown in November 2019. This process permanently froze the SAI system, settled all remaining debt, and allowed final redemption of SAI for underlying collateral, ensuring an orderly wind-down.

The migration was critical for the MakerDAO ecosystem's evolution, enabling support for multiple collateral types (like BAT and later USDC), introducing the Dai Savings Rate as a monetary policy tool, and decentralizing governance with the MKR token. It stands as a landmark case study in blockchain governance and protocol upgrade execution, demonstrating how a decentralized community can successfully manage a complex, value-critical transition without centralized intervention.