The original decentralized financial protocol: MakerDAO and DAI

By 18 de septiembre de 2022febrero 17th, 2023for TC guest posts

Imagine a currency that matches the value of a regular, physical dollar in the United States but can be accessed through the internet. Citizens in countries with rapid inflation can purchase said currency and avoid losing their buying power day by day. People in areas with high crime rates or limited access to banks need secure alternatives to store money. When you own cryptocurrencies, what you really own is a private key, a critical piece of information used to authorize outgoing transactions on the blockchain network.

  • MakerDAO itself is secure, but MakerDAO are only as secure as the wallet storing them.
  • The proposal that has the most votes from all MKR holders becomes the “top proposal” and can be activated to implement changes to the risk parameters of the system.
  • With such big money in the game, MakerDAO has contracted audits by security organizations in the blockchain space and third-party auditors.
  • These investments proved to be fruitful, as the revenue generated by the protocol continued to increase over the past three months, based on data provided by Dune Analytics.

The Maker Protocol, built on the Ethereum blockchain, enables users to create currency. Ledger is your gateway to buy, store and manage your MakerDAO securely. Our solution lets you securely manage your MakerDAO and more than 1800 different assets in one single app. The app provides you with MakerDAO price information and lets you buy MakerDAO by Credit Card or Bank Transfer. Once bought, your MakerDAO will be automatically sent by Coinify to your hardware wallet and secured. Our Bluetooth® hardware wallet lets you manage and protect all your crypto on the go, including MakerDAO.

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By creating more MKR tokens, each individual MKR token becomes less valuable. The protocol uses the proceeds from the MKR token sale to purchase DAI. Just as the car manufacturer can buy and destroy their supercars, so too can the protocol buy back and destroy DAI. By destroying DAI, the amount of DAI available decreases, making each individual DAI more valuable.

collateral asset

MakerDAO has suffered from security issues similar to the DAO’s over the last few months, the prime difference being their decisive action in fixing them, preventing any theft of their collateral or stablecoin. The DAO has been a massive, market altering failure, but Rune, along with many others believe that the underlying technology is not to blame. What we see in terms of utility from complex Ethereum-based smart contracts will be interesting to see following the hard fork.

Assessing the current status of MakerDAO for long-term MKR holders

To provide the makerdao interest rate and pay developers and contributors, MakerDAO must generate revenue. Additionally, when a user falls under the minimum collateralization ratio, the protocol takes a percentage of the collateral sold. Essentially, MakerDAO — including its profitability and stability — is MKR holders’ responsibility. Good decisions reward MKR holders with a more valuable token, but bad decisions punish them by diluting the value of their MKR tokens. The goal of MKR holders is to keep DAI at the one dollar target price and keep MakerDAO profitable. If MKR holders vote for changes that create a surplus in the MakerDAO treasury, the protocol will use the surplus to buy MKR tokens off the market and destroy them.

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