That's a beautiful model only on paper. In practice it didn't quite work out, DAI has several times broken its peg (often upwards, but that's still a problem), and they switched to backing it with more and more traditional stablecoins for stability. This was all before the rebrand to USDS.

> Instead of getting your DAI from an exchange, you could deploy your own instance of a vault, lock your ETH as collateral in it and mint DAI.

Most people that might want to use stablecoins don't have any suitable collateral lying around, so they're dependent on being able to buy or sell it at par. If that peg breaks, the utility of the stablecoin decreases.