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Maker logo

Maker

MKR

2798.74

0.00

Market Cap

$2.603954B

24h Volume

$99.153M

Volume/Market Cap (24h)

3.81

Circulating Supply

930.401883k MKR

Total Supply

977.631037k MKR

Minting DeFi’s Future: What Is Maker in Cryptocurrency? 

Stablecoins aim to provide crypto traders with a safe haven for avoiding price volatility. Unlike other cryptocurrency categories, stablecoins aim to have a predictable 1:1 market price mirroring another asset, typically a fiat currency like the USD. Although centrally managed, reserve-backed stablecoins like USDC are popular options, some crypto traders demand a more decentralized digital token with the same price stability. 

In response to the growing demand for decentralized stablecoins, the Maker protocol proposed "DAI," a community-managed lending software with a USD-pegged virtual currency. The launch of Maker’s lending and governance software transformed the decentralized finance (DeFi) landscape, offering crypto traders a new intermediary-free way to lend and borrow decentralized stablecoins. 

Maker’s history

Entrepreneur Rune Christensen first elaborated on what would eventually become DAI and the Maker Protocol in a 2015 Reddit post titled “Introducing eDollar, the ultimate stablecoin built on Ethereum.” To further his vision of a decentralized stablecoin pegged to the USD, Christensen published a more elaborate white paper in 2017 and released the first iteration of DAI—called “SAI”—on the Ethereum-based Maker protocol in the same year. 

The principal difference between SAI and today’s DAI is that the former only used Ethereum’s Ether coin as collateral, while DAI welcomes multiple Ethereum-based assets. The Maker protocol switched to a multi-collateral system in 2019 when the community voted to approve Basic Attention Token (BAT) as another viable cryptocurrency to use for borrowing DAI. One year later, the Maker Foundation ceded control of the Maker protocol to the web3 community by forming a decentralized autonomous organization (DAO) called MakerDAO. To this day, members of MakerDAO continue introducing protocol updates and working on ways to offer more functionalities and effectively scale the network. 

How does the Maker protocol work?

The Maker protocol functions as a decentralized lending application where traders are free to create (or “mint”) DAI stablecoins into existence by using crypto as collateral. Due to the volatile price fluctuations for crypto assets, Maker uses “overcollateralization” when withdrawing DAI from its vaults, meaning users must put up a higher dollar amount of crypto for the DAI they want to borrow. Borrowers repay their DAI loan plus interest to reclaim their collateral in a connected crypto wallet. The Maker protocol also maintains a collection of assets in reserve to back the 1:1 value of each DAI it issues. 

Although overcollateralization mitigates crypto volatility, there’s still a chance this collateral value falls below MakerDAO’s margin requirements. In these cases, the Maker protocol seizes and sells (or liquidates) the crypto collateral to the MakerDAO community in an onchain auction. All Maker transactions happen via automated smart contract commands, so no counterparties influence the protocol's activities. 

Maker Protocol FAQs

What is the MKR token? 

The MKR cryptocurrency is the Maker protocol’s governance token and runs on Ethereum’s ERC-20 token standard. Anyone holding MKR tokens can vote on MakerDAO proposals, including software upgrades, interest rate adjustments, or newly accepted forms of collateral. Since Maker is a major DeFi project, it’s easy to find the price per Maker coin on a Maker price chart by searching “Maker price” on crypto exchanges or coin aggregator sites. 

Why use the DAI stablecoin? 

Unlike reserve-backed stablecoins, DAI aims to offer crypto traders greater transparency and decentralization. The distributed community of MakerDAO votes on the direction of this project, and everyone can review the project’s source code and onchain reserve. 

What are vaults in the Maker Protocol? 

Maker’s vaults are smart contract-enabled programs where traders lock their crypto collateral to mint DAI. Each vault has unique parameters for borrowing DAI, including accepted collateral types, liquidation ratios, and interest payment reschedules. Users must follow these parameters after borrowing DAI to retrieve their collateral.  

Disclosures

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