MakerDAO is famous for being a relatively long-standing decentralized finance player. Many other players take after the ideas that originated in MakerDAO protocol. Take Maker (MKR) token — a governance token which inspired many spin-offs, or Dai — a decentralized stablecoin. In our MKR guide, we’re going to explain Maker protocol and review the latest MKR news. We’ll answer many questions that beginners in crypto might have: what makes Maker stand out? How to buy Maker coin and why?
What is MakerDAO?
At the very core of new economic systems envisioned by cryptocurrencies are the values of decentralization and accessibility. Bitcoin sprang from frustration caused by the outdated centralized financial system, as the message embedded into its genesis (the very first) block condemns the Fed bailout for the banks in the financial crisis of 2008. It managed to establish a market around it, but did not become an effective means of value transfer due to its volatility. That’s when stablecoins entered the scene. However, most stablecoins that found a significant degree of adoption, like Tether, lacked decentralization, as they were issued by a single company.
MakerDAO exists to solve these problems. MakerDAO is an open-source project on the Ethereum blockchain and a Decentralized Autonomous Organization with the same name. It was created in 2014 with the goal to bring an economic ecosystem powered by a currency that would be truly decentralized and stable.
How did MakerDAO start? We answer next in the MKR guide!
MakerDAO Timeline and Team
MakerDAO started in 2014, and in 2015 its global team of developers began building the ecosystem. By December, 2017 the first whitepaper, introducing the Sai (then Dai) Stablecoin System, was published. In this iteration of the project, the full name of Dai was Single-Collateral Dai (SCD), because the system accepted only ETH as a collateral. Using ETH in this way, any participant could generate SCD through a complex system of smart contracts. The initial iteration of the system included the foundation for the multi-collateral system that exists now. In November 2019, the whole system was updated to the current Maker protocol that is powered by DAI.
MakerDAO was built and launched by the Maker Foundation. Now they are a part of the global community and do not have exclusive governance rights. The board of Maker Foundation includes Rune Christenssen, CEO and founder, Steven Becker, COO and President, and Andy Milenius, CTO. Trademarks and code copyrights are managed by The Dai Foundation, based in Copenhagen, Denmark.
So, what exactly did these teams and people develop? We explain further in our MKR guide.
How does MakerDAO work?
In short, MakerDAO is used for lending the Dai stablecoin. By depositing a supported Ethereum token into a Maker Vault, the user generates a loan represented in DAI, which starts accruing interest. Upon reclaiming the deposited assets, they repay the Vault in the borrowed sum with the accrued fees.
In this diagram, we can see the three groups of participants in the Maker protocol. Users represent the people that own and issue DAI via Maker Vaults. Governors are the participants that have an extensive knowledge of the Maker protocol and help maintain it and direct its development. Maintainers are the businesses and other participants that use the Maker protocol in their platforms or products, as well as keepers who help maintain the Dai peg, and decentralized oracle structure governed by MKR holders.
What is MKR?
Maker (MKR) is a governance token in the MakerDAO system. It represents the voting power of a network participant and entitles them to participate in making decisions that will affect the network. Proposals can be submitted by anyone, but it’s the holders who get to vote.
In addition, MKR can be used for recapitalization of the protocol and sold on an auction if debt exceeds the surplus. This is how it helps maintain the stable peg of Dai. Therefore, it is in the interest of MKR holders to govern the protocol in a way that will not hurt their MKR holdings.
Maker tokens are easily transferable outside the MakerDAO system, so the voting rights can be purchased. We answer the question of how to buy MKR closer to the end of the article, but until then, keep reading!
What is Dai?
DAI is a stablecoin soft-pegged to USD. It means that while its price is always roughly equal to $1, its value is not backed by USD but by other currencies. In DAI’s case, it is the cryptocurrencies locked into the Maker protocol as the collateral. Moreover, MKR tokens can be minted and burned to keep the capitalization of the Dai stablecoin, well, stable. This process is automatic and is performed in most part with the help of smart contracts.
The “debt” which is represented by the DAI supply is over-collateralized by the currencies in the Vault. Think of it like a mortgage: the bank provides a loan in return for ownership rights, and to reclaim the ownership, a taker has to repay the debt and fee.
Comparison with Aave and Compound
The Maker Protocol, one of the largest decentralized applications (dApps) on the Ethereum blockchain, was the first decentralized finance (DeFi) application to earn significant adoption. For the longest time, Maker has had the most assets locked in it according to the DeFi Pulse analytical service.
If we compare it to other largest lending protocols, Aave and Compound, we can see that:
- In Maker, users can borrow Dai only. In Compound users borrow tokens from its 9 markets, in Aave — 20;
- Collateral portfolio is different across all platforms. Aave supports 20 tokens, Compound — 9, Maker — 12;
- Dai Savings Rate smart contract lets users generate interest on DAI locked into the contract through stability fees. In Compound and Aave the interest is generated from the liquidity supply;
- Neither Aave nor Compound have their own stablecoins;
- Aave does not have a governance token. Both Compound token and Maker token are governance tokens.
Speaking about the governance tokens, this is a MKR guide after all, so let us expand on this Maker coin guide.
MKR Price Facts
In early 2018, at the most recent peak of the crypto market, MKR even reached $1,773.92. However, later it stayed in the price range between $350–$800, influenced by market movements and MKR news. It only breached the lower level of this range on the day of the market crash in March, 2020. Having dropped to $200, it still recovered nicely over the next months. At the moment of writing this MKR guide, a single token is worth $612.14 and ranks 32nd by market capitalization ($615,555,152) according to CoinMarketCap.
Price of an asset is not the only thing you should limit your research to. Read the Maker coin guide until the end for more info and to learn how to buy Maker coin or how to exchange MKR.
How to use MKR?
The whitepaper describes possible uses for the Maker protocol as following:
- Issuance and maintenance of the Dai stablecoin, that can fulfill the role of a digital dollar;
- Asset expansion: it is quite possible that the community will be able to use the protocol to issue alternative assets similar to Dai;
- Decentralized oracle network akin to Chainlink.
The primary use case for MKR token itself is to influence these broad development directions. MKR can also be used to pay the outstanding stability fee on a Dai debt closing, along with Dai itself. If you plan on using the Maker protocol, it might be a good idea to learn where and how to buy MKR.
Sounds good, but no project is perfect. What were the main criticisms of MakerDAO? This is what the next section of our MKR guide is about.
The overly complex architecture and economic model of MakerDAO and DAI have been criticized in the past. Regarding Maker token specifically, its value is entirely dependent on the MakerDAO system, but the stability of a decentralized lending system and stablecoin has been doubted by some industry experts more than once. In fact, earlier this year, the MKR news reported that Maker holders were considering an emergency shutdown in the face of $4 million debt. It arose as a result of a technical error which coincided with a period of Ethereum network congestion and a sudden crash of the market prices. The community had to hold an emergency vote on a variety of changes to the protocol to help the project stay afloat.
Enough about the past — time to see what future changes we can expect, read the MKR guide on!
Future plans of Maker
Governance will decide on a ton of stuff ranging from day-to-day management of the system to larger upgrades or system changes if they are needed. The long term vision for MakerDAO is to set up and mature the Governance of the system in such a way where eventually the Foundation will dissolve and MakerDAO will be able to run itself. In the long run, this should drive the demand for MKR tokens as well.
The active Maker Improvement Proposals are discussed on the MakerDAO forum. Among the most discussed are onboarding of YFI and Chi Gastoken as a collateral, improved vault liquidation process and real world asset introduction. Most of these are aimed at both ensuring sustainability of the protocol in the long run and realizing its potential.
What else does the community discuss? We cover some MKR news and opinions in the next section of our MKR guide.
MakerDAO Discussions on Twitter
Let’s have a look at what the Twitter users discuss at the time of writing this Maker coin guide.
— BigTexCrypto (@BigTexCrypto1) August 30, 2020
Trader BigTexCrypto tweeted their chart with an outline of a cup and handle pattern at the time of publishing this MKR guide. This pattern is generally interpreted as a sign of bullish continuation.
Announcement: @MakerDAO #DAI owners can now skip skyrocketing ETH fees when transferring $DAI. Cross the @Syscoin #Ethereum Bridge to save +99% on fees.https://t.co/MnPGTkkqnw
DAI Asset ID: 347013664
Symbol: MCDx pic.twitter.com/YoVyuXfr7Z
— Syscoin (@syscoin) August 19, 2020
Syscoin partnered with Maker to add a bridge between two systems amidst the growth of fees on Ethereum. Partnering with an interoperability provider might help the Maker protocol cover a larger user base and increase adoption.
— CryptoPotato Official (@Crypto_Potato) August 10, 2020
Crypto Potato news outlet reports that DAI hit an all-time high in supply as the demand for DeFi grows. As DAI is a stablecoin, its supply directly correlates with demand. The growing interest in DeFi is good news for all MKR holders, too, as the Maker protocol sees more users and it grows in value.
The @MakerDAO Foundation is extending its trial using SourceCred to pay contributors to Maker governance. If all goes well, it intends to propose ongoing payments from the Maker protocol 🥳 Read about it here:https://t.co/J1SLOI0CKu
— SourceCred (@sourcecred) September 1, 2020
SourceCred is a project which aims to allow protocol contributors to be paid on-chain. In this tweet, they announce the agreement between them and the Maker Foundation to continue with the service trial. For the decentralized governance, this is a huge step, since it might eventually allow for rewarding contributors without needing an intermediary. “By extending the trial another three months, with the intention of asking MKR holders to implement ongoing payments thereafter, contributors can have more confidence that their contributions will generate a more predictable income,” the linked post says.
How to buy MKR?
If you are thinking about how to buy Maker coin, we got you: You can purchase MKR tokens with crypto on ChangeHero! If you need to buy crypto first, you can also do this on ChangeHero with a credit or debit card.
Read until the end to learn how to buy MKR step-by-step!
How to store MKR?
Maker (MKR) is an ERC-20 token, so a range of the wallets in which it can be stored is rather wide. We have a couple of recommendations for you:
- Hardware wallet — Trezor;
- Software — Exodus, Magnum — available on desktop and mobile.
With these wallets you will never have to worry about how to exchange MKR again: their interfaces have built-in crypto-to-crypto exchange functionality. Just exchange some of your crypto on the go in these wallets using ChangeHero!
Got the wallet ready and some crypto to exchange? Then let’s see how to buy Maker coin on ChangeHero!
How to exchange MKR? Step-by-step directions
Puzzled how to exchange MKR on ChangeHero? Here is the Maker coin guide that can help you:
- Choose the currencies on the home page, amounts and the type of exchange (Best or Fixed rate). Provide your MKR wallet address in the next step and adjust the transaction details if needed;
- Send in a single transaction the sum of cryptocurrency you will be exchanging. For Fixed Rate transactions you have 15 minutes before it expires;
- Sit back and relax. From now on we will be handling everything: checking the incoming transaction and doing the exchange as soon as it arrives;
- As soon as the exchange has been processed, your MKR is on the way to your wallet.
If you ever run into any issues during your swap, our support specialists are always available to help you out in the chat or through the email: [email protected].
MakerDAO is simultaneously a pioneer in DeFi and a trailblazer for all new projects centered around decentralized finance. Through ups and downs, it still provides enough value to amass millions of dollars locked in the protocol.