InstaDApp’s approach to DeFi has been to proactively understand the critical problems in the space, and work on solving them in a way that’s as trustless and user-friendly as possible.

The migration to Multi Collateral DAI on Nov 18th is one of the most important transitions in the DeFi space thus far. In our opinion, a successful transition will be a strong testament to the resilience and flexibility of the DeFi space, much like how successfully managing the massive volatility in ETH prices earlier this year can be seen as a big confidence boost.

As such, we would like to play our part in helping the ecosystem manage this transition. In our estimation, the most tricky aspects in achieving this transition are: (1) the deep interlocking of DAI in various protocols (particularly Compound), and (2) around the need for sufficient SAI liquidity (Single Collateral Dai) in the markets during the ongoing transition.

In this post, we seek to do the following:

Articulate our stance on why a successful migration is important for the ecosystem.

Clarify the difference between the 2 forms of DAI, and where the confusion stems from.

Explain user-facing and potential systemic problems for Compound users and whale CDP owners.

and Present our approach to solving the user problem and in turn, mitigating the systemic problems.

[NOTE] For users who are just DAI holders or manage smaller CDPs, migration should be easy. They will be able to do the migration either using the InstaDApp or Maker’s site directly. For Compound users and holders of bigger CDPs (or anyone who’s interested), please read on.

Before we begin, note that terminology is a major source of confusion for many users, even seasoned ones, given the fact that many outlets and projects refer to the same things using different terminologies.

Single Collateral DAI — Maker now refers to this as SAI. This is essentially the “old“ DAI, collateralized only with ETH.

— Maker now refers to this as SAI. This is essentially the “old“ DAI, collateralized only with ETH. Multi Collateral DAI — Maker now refers to this as DAI, as from their point of view, this will be the new default and can be collateralized by multiple tokens. This is also the token that integrates the ‘Dai Savings Rate (DSR)’.

To maximize clarity, we will be referring to Single Collateral Dai as Sai and Multi Collateral Dai as Dai throughout this article.