Started in 2014, MakerDAO was one of the first projects built on Ethereum. Nowadays, MakerDAO has more than $9.6B worth of assets locked inside the protocol, with its stablecoin - DAI being minted for more than 6.6B tokens and circulating across multiple blockchains.
What is MakerDAO? What is DAI? How does it work? You will figure it out in this article.
What is MakerDAO?
MakerDAO is one of the largest lending protocols at the moment. By depositing any Ethereum-based assets, users can mint the DAI stablecoin token through a unique smart contract known as Collateralized Debt Positions (CDPs).
MakerDAO aims to provide a decentralized, permissionless, and unbiased money market. Its vision is to replace the original centralized financial system with a DAO (Decentralized autonomous organization). To some extent, MakerDAO has accomplished that ideology in both aspects.
What is MKR Token?
There are two main tokens in the MakerDAO ecosystem: MKR and DAI. While DAI is the core component to sustain the MakerDAO’s lending model, MKR serves as the governance token.
How does MakerDAO work?
The key factor that keeps MakerDAO operating and remaining stable is its stablecoin - DAI. DAI is a decentralized, collateral-backed stablecoin that is soft-pegged to the US Dollar. How can DAI achieve its pegged price of $1?
First of all, minting DAI requires users to deposit an amount of assets that are worth more than the minted DAI. In case the value of the collateral falls lower than the Liquidation Ratio (currently 150% respective to the value of the minted DAI), the collateral assets will be liquidated.
The logic behind MakerDAO’s methodology is that the DAI minted will always be backed by a more worthwhile amount of assets. This way the use of DAI becomes more secure and trustworthy.
The process of keeping DAI pegged to its value involves:
- Keepers: A keeper (usually a bot) always looks for arbitrage opportunities. They buy DAI when its price is lower than $1, and sell DAI when its price gets higher than $1.
- Dai Savings Rate (DSR): The Dai Savings Rate allows DAI holders to lock their DAI into MakerDAO to earn savings automatically. MKR holders can increase the DSR when the DAI price is below $1 as it will encourage people to buy and stake DAI, thereby increasing the buy demand to get the DAI price back to $1. The other situation requires the reverse process.
Now that the price of DAI is pegged to $1, users can safely deposit into MakerDAO to borrow DAI. This can be done through a smart contract called Maker Vault. Everyone can enter the MakerDAO application and create Vaults through a number of interfaces, such as Oasis, InstaDapp,...
To withdraw the collateral, users have to repay the borrowed DAI along with the Stability Fee, also known as the interest cost. Vaults are non-custodial and users can create as many of them as they please, as long as the value of their collateral is above the Liquidation Ratio.
However, as a decentralized protocol, there are still risks while using MakerDAO. To protect users, Emergency Shutdown comes as the last resort. When initiated, Emergency Shutdown stops every attempt to create new Vaults or manipulate existing Vaults, at the same time freezes the Price Feeds. This ensures that users can withdraw their collateral at net value.
Emergency Shutdown can also be triggered by MKR voters by depositing MKR into the Emergency Shutdown Module (ESM), should they feel it is imperative.
Detailed information about MKR and DAI
MKR Price Today
Currently, you can track the price of MKR on Coin98 Markets.
Coin98 Markets is a website that helps users to get updates of the real-time prices, as well as view the detailed information of a Token Metric from any project. More specifically, you can access the home page or the community page of a project, or filter the coins/tokens by Market Cap, Trading Volume, etc.
MKR Key Metrics
- Name: MakerDAO.
- Ticker: MKR.
- Token standard: ERC-20.
- Token type: Governance.
- Max supply: 1,005,577 MKR.
- Circulating Supply: 991,328 MKR.
- Contract address: 0x9f8f72aa9304c8b593d555f12ef6589cc3a579a2.
DAI Key Metrics
- Name: DAI.
- Ticker: DAI.
- Token standard: ERC-20.
- Token type: Utility.
- Max supply: 6,598,723,331 DAI.
- Circulating Supply: 6,598,723,331 DAI.
- Contract address: 0x6b175474e89094c44da98b954eedeac495271d0f.
MKR Token Allocation
MKR Token Sale
MakerDAO has raised a total of $54.5M through 3 private sales.
MKR Token Release Schedule
All MKR tokens have been released.
MKR Token Use Cases
Currently, the MKR token serves only for governance purposes. MKR holders can vote on the following proposals:
- Add a new collateral asset type with a unique set of Risk Parameters.
- Change the Risk Parameters of one or more existing collateral asset types, or add new Risk Parameters to one or more existing collateral asset types.
- Modify the DSR.
- Choose the set of Oracle Feeds.
- Choose the set of Emergency Oracles.
- Trigger Emergency Shutdown.
- Upgrade the system.
How to get MKR and DAI Token
You can get MKR by lending in MakerDAO, and get DAI by minting them after collaterizing your assets.
How to buy MKR on Coin98 Exchange
You can buy MKR through:
- DEXs: Uniswap, Sushiswap,...
- CEXs: Coinbase, Binance, Huobi,...
You can also swap and buy MKR directly at the Coin98 Exchange interface at the end of this article! Coin98 Exchange is a decentralized exchange (DEX), a Multi-chain liquidity aggregator that offers users a wide variety of DeFi services (swap, stake, lend, borrow,...) through intuitive and simple interfaces.
Learn more: How to use Coin98 Exchange
How to store MKR Token
You can store MKR token on Coin98 Wallet with these steps:
Step 1: Open Coin98 Wallet & click Receive on the home screen.
Step 2: Search MKR Token.
Step 3: Click on the correct result, copy the wallet address and send MKR to this address.
How to buy DAI token
You can buy DAI on Coin98 Exchange by following these steps at: exchange.coin98.com
Step 1: Connect Coin98 Extension Wallet.
Step 2: Select Uniswap.
Step 3: Choose the trading pair:
- Search DAI.
- If the result does not come up, you can paste the contract of MKR into the search box: 0x6b175474e89094c44da98b954eedeac495271d0f.
Step 4: Adjust the amount you want to swap.
Step 5: Adjust the gas fee, then click Approve.
How to store DAI Token
You can store DAI on Coin98 Wallet with these steps:
Step 1: Open Coin98 Wallet & click Receive on the home screen.
Step 2: Search DAI Token.
Step 3: Click on the correct result, copy the wallet address and send DAI to this address.
Since July 20, 2021, MakerDAO has become a DAO and fully decentralized. From now on, every adjustment will depend on the community. Some ongoing proposals can be listed as:
- Add the Strategic Happiness Core Unit, SH-001.
- Modify the DAI budget for Core Unit Sustainable Ecosystem Scaling, SES-001.
- Add the Collateral Engineering Services Core Unit, CES-001.
- Add the budget for GovAlpha Core Unit, GOV-001.
Team, Investors and Partners
- Rune Christensen: Founder and CEO.
- Steven Becker: President and COO.
- Andy Milenius: CTO.
MakerDAO is invested by various well-known venture capitals, namely a16z, Paradigm, Polychain, Dragonfly Capital,...
Over 400 Dapps (Decentralized applications) and services have integrated with MakerDAO and DAI, including wallet, payment, DeFi, games,...
- Get DAI: Coinbase, Oasis, Wyre,...
- Use DAI: Foundation, imToken, Wirex,...
- Hold DAI: Anchorage, Metamask, Ledger,...
- Accept DAI: Opensea, DENT, Red Cross Argentina,...
- DeFi: 1inch, Curve, InstaDapp, Uniswap,...
- Games: League of Kingdoms, Sandbox, F1 Delta Time,...
Is MakerDAO (MKR) a good investment?
I hope that with the aforementioned information, you have understood what MakerDAO is and how MakerDAO works. This article should give you a deep insight into the project, so there is no financial advice. You should Do Your Own Research before conducting any investment, and be responsible for your own fund. However, Coin98 will provide some notable points of the project to give you the best overview to make your own decisions.
- At the moment, a total of 6.6B DAI have been minted into the market. This makes DAI the highest-ranked stablecoin that remains decentralized. Other stablecoins like USDT or USDC, however, heavily rely on a third party to issue their tokens, making them untransparent and insecure to use.
- MakerDAO has become a fully decentralized DAO since 20 July, 2021, which means that every improvement or change made within the project now solely depends on the community’s decision. DAO is the final target that every DeFi project wants to reach, creating a truly “Decentralized Finance”.
- Although MakerDAO & DAI have accomplished a variety of incredible achievements, the protocol has to face a major challenge: scalability. Since minting DAI always requires a more significant value of collateral, it is extremely difficult to apply DAI on a larger scale.
- The MKR token is used to govern the MakerDAO protocol. As a result, MKR should be purchased as a means of governance participation instead of an investment.