Maker (MKR): protocol for creating decentralized stablecoins
Maker is a decentralized finance protocol whose purpose is to generate DAI stablecoins. Users can send cryptocurrency to the protocol and receive the amount of DAI according to the current market rate in dollars. Subsequently, you can make a reverse exchange.
MKR is a governance token, meaning its holders can participate in the protocol's governance, which can be compared to owning shares.
Technical features
Maker is a decentralized autonomous organization (DAO) based on the blockchain. Such organizations differ from centralized ones in that the participants make decisions jointly, not by any central body. It is based on the Ethereum blockchain.
MKR holders can vote on issues related to the system's business logic and risk management. The Maker credit protocol works on the principle of margin trading: Dai tokens are secured by collateral — the cryptocurrency sent to the smart contract. A collateralized debt position provides greater security and lower prices than existing centralized margin trading systems.
Three key components of the system:
- Collateral-based Dai minting platform.
- Dai stablecoins.
- Decentralized organization MakerDAO.
All of them together represent a comprehensive financial solution for users from all over the world.
Principle of operation
The Maker protocol generates new Dai using smart contracts called Maker Vaults. There can be many such contracts (for example, quite well-known ones are Oasis and Instadapp), and they are created using unique online interfaces and programs that work like portals.
The participant deposits a cryptocurrency from among those supported by the contract (most often ETH) to receive Dai; afterwards, if he wants to get back his collateral, he must first return the Dai he generated and some commission - a stability fee.
Control token MKR
Unlike DAI, which is pegged to the dollar, the price of MKR itself is volatile. This is an ordinary utility token of the ERC-20 standard. Its value rises or falls depending on the rise or fall in the popularity of the protocol. In addition to Ethereum, the token is also present on other blockchain networks, such as Arbitrum, Avalanche, Polygon, and Energi.
The MKR token can be used to control the Maker protocol:
- Each of the proposals being voted on is presented in the format of a smart contract and can be launched on any Ethereum address.
- MKR owners vote on which proposal they are inclined to approve.
- The address with the most approval votes gets administrator access to amend the Maker protocol.
The value of each participant's vote depends on the size of their stake in MKR. The main types of proposals for decentralized voting: adding support for new cryptocurrencies and tokens for minting Dai, adjusting risk parameters, choosing oracles (providers of external information in a smart contract), etc.
MKR cannot be mined through mining or staking but can be purchased through decentralized or centralized exchanges and exchangers (use BestChange to find the best ones).
Conclusion
According to analysts, Maker is aimed at stabilization and growth. It has a relatively high price ($920 as of July 2023, the maximum of $6200 was reached in May 2021), unlike most similar utility token projects.
Dai is already considered one of the best tokens for storing capital thanks to its high stability. The MKR token performs many functions in the system and can be transferred and received by any Ethereum account or smart contract with the MKR transfer option.
A token is only created or destroyed due to a change in the price of DAI, so no mining or staking is required to own it. The integration of MKR into various decentralized applications allows you to make fast payments for any purpose. The price of a token is highly volatile — it rises or falls quickly in a short period.
