Key information (February 15, 2022)
- Circulating Supply — 977,647 MKR
- Max Supply — 1,005,577 MKR
- Sector — Lending
- Token Type — ERC-20
- Token Usage — Governance & Source for Recapitalization
- Consensus Algorithm — proof of stake
- Genesis Block Date — November 25, 2017
- All-time high — $6,247.16
- ATH Date — May 4, 2021
What is MakerDAO?
MakerDAO is a decentralized organization built on the Ethereum blockchain. Its main aim is to facilitate lending and borrowing of cryptocurrencies without the need for any central authority.
Generally, it’s a two-token smart contract system that manages borrowing and lending as well as governance.
The first token is Dai, a crypto collateral backed stablecoin that is soft-pegged to the U.S. dollar and offers stability to the network. The Maker protocol offers token holders the ability to collateralize ethereum (ETH) and other Ethereum based tokens in return for Dai token loans. These loans are also repaid in Dai tokens and managed through a collateralized debt position (CDPs).
The other token is the MKR which is used as a governance token by granting its holders voting rights. This is where the Decentralized autonomous organization (DAO) part of the name comes from. DAO means that the protocol is governed by rules written in the Maker protocol. MKR token holders are the decision-makers of the Maker protocol. They are supported by the entire MakerDAO community and various external parties.
The MakerDAO community ascribe to the belief that a decentralized stablecoin is required for businesses to realize the full advantages of a digital currency. The Maker protocol is a key player in the Decentralized finance (DeFi) sector — a term used to refer to financial tools and services that do not rely on any central authority to coordinate.
A brief history of the MakerDAO network
The MakerDAO project was started in 2015 by a Danish developer and current CEO, Rune Christiansen, who built the Maker protocol under the banner Maker Foundation. The Foundation’s key role was to direct the development and manage the project’s efforts.
Initially, Christiansen announced his original concept of Dai tokens on a Reddit post stating, “introducing eDollar, the ultimate stablecoin built on Ethereum.” Later in August 2015, the project achieved a milestone with the launch of its Maker token (MKR). MKR established the basis of governance on the protocol, and a DAO was coming into shape.
On December 10, 2017, the first formal whitepaper was released, and the MakerDAO community introduced the idea of Multi-collateral Dai (MCD). Later, on December 19, 2017, the first version of the Maker was launched based on the single-collateral stablecoin SAI, as the first iteration.
Less than a year later, in September 2018, the first MKR vote was held on the governance portal, ushering an era of increasingly active Maker governance in the network.
On February 11, 2019, the platform reported that Dai tokens in circulation reached 76 million, a 20% monthly growth. Later that year, Christiansen announced the launch date of MCD, and on November 6, 2019, the Debt ceiling of Sai tokens was increased to 120 million Sai tokens. In the same month, MCD was launched, and Dai tokens would now be generated (minted) from various crypto assets approved by the Maker governance.
One month later, the total number of multi-collateral Dai tokens surpassed single-collateral Dai tokens (Dai) as users swapped Dai tokens for upgraded Dai tokens. With a sign of complete decentralization, the Maker foundation began transferring control to the community on December 31, 2019.
In February 2020, a new whitepaper was published, and in March of the same year, the transfer of control to the community was finalized. On April 27, 2020, a new board of directors was formed, including external legal teams and fintech experts. Later that year, in September, the debt ceiling of Dai tokens was increased to 1 billion, and Dai tokens could now be generated from various crypto assets approved by Maker Governance.
Business use cases of the Maker protocol
By harnessing the power of blockchain, the Maker protocol has unlocked a versatile digital currency through its decentralized Dai stablecoin. Unlike traditional fiat currencies, Dai token is borderless and unbiased. As of this writing, over 9 billion Dai tokens have been minted and being used in many ways.
Primarily DAI tokens are used for:
- As a hedge of inflation of local markets, since it’s pegged to the dollar, Dai token helps users maintain the dollar value of their money.
- As a decentralized finance (DeFi) system that provides financial services and tools that are only available to traditional intermediaries. Users and organizations can borrow, lend coins or even earn interest on the Dai tokens they lock in smart contracts.
- Organizations also use Dai to stay stable during times of high volatility in the cryptocurrency market.
- As a stable medium of exchange, Dai is also used for debt repayment, cross-border payments, and payments of goods and services. For instance, UNICEF accepts Dai donations from all over the globe.
- Last but not least, Dai can be traded against other cryptocurrencies.
An overview of the Maker protocol and its features
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