Cryptocurrency

What is Maker DAO (MKR) | Whitepaper Summary

MAKER DAO WHITEPAPER EXPLAINED!

WHAT IS MAKER DAO(MKR)?

A decentralized organization called MakerDAO is working to stabilize the crypto market. The two-token mechanism is used by the Maker Protocol. The first token is Dai, a stablecoin that gives collateral backing on the platform. A decentralized stablecoin, in the opinion of the Maker Foundation and the MakerDAO community, is necessary for any company or person to experience the benefits of digital money.

The second is MKR, a governance token used by stakeholders to control Dai and maintain the system. The Maker Protocol is governed by MKR token holders, with support from the general public and different outside stakeholders. By developing an inclusive platform for economic empowerment and providing everyone with equitable access to the global financial market, Maker is enabling the potential of decentralized finance for everyone.

On the Ethereum blockchain, there is a decentralized global reserve bank called MakerDAO. The collateralization and lending of the Maker protocol’s stablecoin (named DAI), as well as other features, are automated using Ethereum smart contracts (like governance, for example).

EMERGENCE OF MAKER DAO (MKR)

2014 saw the founding of MakerDAO by businessman Rune Christensen of Denmark. Dai and the related smart contracts were formally introduced on the primary Ethereum network on December 18, 2017. Even though the price of Ether, the only acceptable collateral at the time, fell by more than 80% during the same time period, the price of Dai was successfully kept near one US dollar during its first year of existence.

By acquiring 6% of all MKR tokens, venture capital company Andreessen Horowitz invested $15 million in MakerDAO in September 2018. In 2018, MakerDAO established the Maker Foundation, which is based in Copenhagen and works to launch the ecosystem by, among other things, building the necessary code for the platform’s functionality and adaptability.

Internal disagreements on whether MakerDAO should integrate more with the traditional financial system surfaced in 2019. Greater regulatory compliance was something Christensen desired so that assets other than cryptocurrencies could be used as collateral for Dai. The CTO of MakerDAO left as a result of the conflict. Due to the COVID-19 pandemic’s extreme market volatility in March 2020, Dai went through a deflationary deleveraging spiral that allowed it to trade for as much as $1.11 at its height before reverting to its original $1.00 valuation.

Read more: Ethereum Whitepaper Summary

MAKER DAO’S ARCHITECTURE

Holders of MKR have the final say in how the Maker protocol is run, with each token representing one vote. Anyone can submit a suggestion, which is then subjected to a Governance Poll to determine an approximate consensus among the community members. Polls can be preemptive to account for sporadic or intermittent problems that need to be fixed for future problems or reactive to a change in the current situation. Once there is consensus, the matter is put to a vote by MKR holders in an executive session, who decide whether or not to implement the change.

EMERGENCY SHUTDOWN

The Emergency Shutdown capability is a crucial part of Maker governance. It has two purposes: it can be used as a last-resort technique in the event of any malevolent governance activity, attack, or security breach, or to shut down the old system in the event of a significant upgrade, as we will see with single collateral Dai.

GOVERNANCE SECURITY MODULE

To provide stakeholders time to analyze the code and preserve the integrity of the system, there is a 24-hour delay after an Executive Vote is passed before the modification is implemented. To ensure that all stakeholders receive the fair value that is now locked in the system, MKR holders have the option to choose an emergency shutdown if they feel that the modification will harm the system.

ON-CHAIN GOVERNANCE DETAILS

Executive Votes are ongoing and reflect the system’s current state, whereas Governance Polls are held over certain periods to measure community consensus. A proposal that reflects a new state of the protocol may be made at any time, therefore MKR holders must constantly keep an eye out for these changes and vote appropriately. MKR holders must keep their tokens in a voting construct to cast a ballot; after doing so, they are free to switch to rival proposals. Therefore, it is anticipated that MKR holders would actively participate in governance and influence how the system develops over time.

ADVANTAGES OF MAKER DAO (MKR)

  1. Generation of Self-Sovereign Money People purchase Dai every day to utilize it in the ways described below on a variety of exchanges. However, a large number of people use the Maker Protocol to produce Dai rather than buying it. Users lock an excess of collateral in Maker Vaults, which generates Dai based on the amount of collateral locked.
  2. Stability Despite Volatility In the erratic world of crypto, the Dai stablecoin promises steadiness. Dai is supported by an abundance of collateral kept in Maker Vaults and soft-pegged to the US dollar. Dai enables users to store market value during periods of high volatility without leaving the crypto realm
  3. Comfortable On/Off Ramps Dai may be quickly converted into fiat money via a variety of regulated services. For instance, both Coinbase and its trading tool Coinbase Pro let users both purchase and sell Dai for fiat. financial services Wyre is another useful entry and exit point for Dai stablecoin holdings.
  4. Convenient, Quick, and Affordable Remittance Dai can be utilized as a reliable means of exchange for debt repayment, international trade, and the purchase of goods and services. Using typical financial services to send money across borders is expensive and time-consuming.
  5. Savings By securing their Dai in a unique smart contract, savings holders of the Dai stablecoin can earn the Dai Savings Rate (DSR) on the Dai they possess. No minimum deposit is necessary to earn the DSR, and all or any portion of Dai may be withdrawn at any time. There are no fees associated with this offer, nor are there any geographical restrictions or liquidity barriers.

MAKER DAO’S (MKR) TOKENOMICS

The MakerDAO Protocol and the DAI stablecoin are kept stable via the MKR native governance token, which is used to vote on proposals for protocol changes and governance. The MakerDAO Team purposefully chose not to hold any specific ICO to bootstrap their token when the MKR token launched in 2017.

MKR, the native asset of MakerDAO, is now trading at around $768 (at the time of writing this article), and its all-time high is $6,339.02, which it attained in early May 2021. The maximum token supply of MKR is 1,005,577 MKR, and it has a market capitalization of more than $0.7 billion(at the time of writing this article).

With numerous extensively used use cases throughout the digital asset ecosystem, MakerDAO has shown to be an immensely strong, effective project. The DAI stablecoin is just too significant for the DeFi space to ever be remotely overlooked. Thus, the MKR token should continue to rise alongside the rest of the MakerDAO ecosystem due to its lending and borrowing functions, its collateralized assets, and its use of the DAI stablecoin, resulting in a general upward momentum over the medium- to long-term perspective.

MKR PRICE PERFORMANCE OVER THE YEARS

MKR/USD | Source: Tradingview

Read more: Lido DAO Price Prediction

MKR WHITEPAPER SUMMARY(ROADMAP & VISION)

The Maker Protocol was designed to unlock access to global financial markets for people around the world. Maker provides financial tools and resources that are secure, stable, and transparent. Users only need a crypto wallet and a few cryptos. With just those two things, anyone can open the Maker Vault and safely generate Dai.

There is no bank involvement or set repayment terms. Maker users can withdraw Dai to their vault at any time. Holding Dai offers a low barrier-to-entry solution for storing value without worrying about inflation or price volatility. Maker Vault currently accepts a variety of cryptocurrencies as collateral to generate Dai.

Each crypto is voted on by MKR holders. Moving forward, MakerDAO hopes to take a major step forward in improving blockchain scale and growth by adding support for real-world collateral such as gold, tokenized real estate, and blockchain-based bonds. Maker also envisions a world with greater financial transparency. Because Dai is backed by a public blockchain cryptocurrency instead of dollars in private bank accounts, the value of individual vaults can be verified by anyone, not just select employees of a single bank. Anyone with an internet connection can monitor the system status.

Visit daistats.com to see token supply, collateral amount, current fees, and movements. This page contains important statistics about the manufacturer that are freely accessible and verifiable via blockchain. As DeFi grows in popularity, MakerDAO hopes that this level of transparency coupled with decentralized governance will increase the economic empowerment of users around the world.

CONCLUSION

One of the biggest and longest-running dApps on the Ethereum blockchain, MakerDAO controls a sizable portion of the overall liquidity in the DeFi ecosystem. MakerDAO’s two-token model, MKR, and DAI make it possible for virtually anybody in the world to achieve economic empowerment thanks to its permissionless, trustless, and DAO-like financial platform.

By locking up a range of different assets as collateral on Maker Vaults, network users can use the Maker Protocol to produce collateral-backed DAI stablecoin. After that, users can deploy their freshly created DAI on different DeFi protocols, partake in yield farming or staking, or even redeploy DAI to add more assets as collateral to Maker Vaults so they can leverage their positions.

HOW TO INVEST IN MAKER DAO (MKR) 

Use this three-step process to buy your first AVAX token using the CoinDCX, crypto investing app.

  • Sign Up for the CoinDCX account: Enter a valid email address and a user name on the sign-up page. Once the Email Id has been verified, set a strong password to secure your account.
  • Verify the account: You need to complete your KYC, to buy a MKR token on the CoinDCX platform. All you need to do is upload the documents and your account will be set up in 15 minutes.
  •  Buy MKR INR: After the account has been verified, you can deposit any amount of fiat currency you are comfortable with and start your crypto journey!

Read more: Crypto whitepaper summaries of top cryptos by market cap 


Disclaimer: User Generated Content – Original Content created by a member of BITS Pilani, under the consultation of Dr. Amit Dua, Assistant Professor, Computer Science Department, BITS Pilani, Pilani Campus in association with CoinDCX. The views and opinions expressed within this post belong solely to the author.
Author: Harshit Jain


 

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