How does cDAI work?
cDAI is a cryptocurrency project that is built on the Ethereum blockchain.
It is a decentralized, open-source, and permissionless platform that allows users to deposit their Ether (ETH) into a smart contract and receive cDAI tokens in return. The cDAI tokens are then used to generate interest on the deposited ETH. The cDAI project works by allowing users to deposit their ETH into a smart contract, which is managed by the Compound protocol.
This protocol allows users to borrow and lend cryptocurrencies in an automated manner. When users deposit their ETH into the smart contract, they receive cDAI tokens in return. These tokens are then used as collateral for loans taken out from the Compound protocol.
The interest earned from these loans is then distributed back to the users who deposited their ETH into the smart contract, providing them with passive income from their holdings. The cDAI project also provides additional features such as liquidity pools and staking rewards for users who hold cDAI tokens for extended periods of time. These features help to increase user engagement and incentivize long-term holding of cDAI tokens, further increasing its value over time.
