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MakerDAO is a decentralized autonomous organization behind the Dai cryptocurrency stablecoin. [1]
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MakerDAO is a decentralized autonomous organization behind the Dai cryptocurrency stablecoin. [1]
MakerDAO initiated smart contracts enable people to deposit collateral and take out loans in Dai. It seeks to stabilize the price of Dai to keep it pegged in a one-to-one ratio to the United States dollar. [2] By controlling the collateral types and amounts for borrowing Dai from its smart contracts and the interests rates for borrowing Dai from or storing Dai with its smart contracts, MakerDAO influences the amount of Dai in circulation, and thus its market price. [3] As of November 2020, more than $2 billion is deposited in MakerDAO smart contracts. [4]
MakerDAO's smart contracts reside on the Ethereum blockchain. [5] Anyone who owns MKR can vote on MakerDAO proposals. Votes are weighted based on their amount of MKR relative to the total circulating supply. [3] The MKR token is also used for investment, as its supply is deflationary; borrowers of Dai must send some MKR to a burn address when repaying a Dai loan, which permanently takes that MKR out of circulation. [3]
MakerDAO was formed in 2014 by Danish entrepreneur Rune Christenson. [6] It has received over $25 million in funding from venture capital firms, including Andreessen Horowitz and Polychain capital. [7] Andreessen Horowitz made its investment by purchasing seven percent of the supply of MKR tokens, which gives it seven percent of the voting power for MakerDAO. [3] MakerDAO is credited with being the first decentralized finance or "DeFi" platform. [8]
In 2018, MakerDAO formed the Maker Foundation, run from Copenhagen, which serves to help bootstrap the ecosystem by, for example, writing code needed for the platform to function and adapt. [9]
MakerDAO experienced internal struggle in 2019 over whether it should integrate more with the traditional financial system. Christenson wanted greater regulatory compliance to allow for assets besides cryptocurrency to serve as collateral for Dai. The struggle led to the departure of MakerDAO's CTO. [6]
MakerDAO was successfully able to keep the price of Dai close to one U.S. dollar during its first year of existence, even though the price of Ether, the only collateral available at the time, declined by more than 80% over that period. [3] In the midst of extraordinary market volatility in March 2020 resulting from the COVID-19 pandemic, Dai experienced a deflationary deleveraging spiral that caused it to trade at prices substantially higher than the U.S. dollar. [10]
A smart contract is a computer program or a transaction protocol which is intended to automatically execute, control or document legally relevant events and actions according to the terms of a contract or an agreement. The objectives of smart contracts are the reduction of need in trusted intermediators, arbitrations and enforcement costs, fraud losses, as well as the reduction of malicious and accidental exceptions.
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Ethereum is a decentralized open source blockchain featuring smart contract functionality. Ether (ETH) is the native cryptocurrency token of the Ethereum platform. It is the second-largest cryptocurrency by market capitalization, behind Bitcoin. Ethereum is the most actively used blockchain in the world.
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The DAO was a digital decentralized autonomous organization, and a form of investor-directed venture capital fund. It launched in April 2016 after a crowdfunding campaign. By September 2016, it was delisted and had, in effect, become defunct.
Ethereum Classic is an open source, blockchain-based distributed computing platform featuring smart contract (scripting) functionality. It supports a modified version of Nakamoto consensus via transaction-based state transitions executed on a public Ethereum Virtual Machine (EVM).
Cardano is a cryptocurrency network and open source project that aims to run a public blockchain platform for smart contracts. Cardano's internal cryptocurrency is called Ada. The development of the project is overseen and supervised by the Cardano Foundation based in Zug, Switzerland.
Tether is a controversial cryptocurrency with tokens issued by Tether Limited. It formerly claimed that each token was backed by one United States dollar, but on 14 March 2019 changed the backing to include loans to affiliate companies. The Bitfinex exchange was accused by the New York Attorney General of using Tether's funds to cover up $850 million in funds missing since mid-2018.
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A non-fungible token (NFT) is a special type of cryptographic token which represents something unique; non-fungible tokens are thus not mutually interchangeable. This is in contrast to cryptocurrencies like bitcoin, and many network or utility tokens that are fungible in nature.
Stablecoins are cryptocurrencies designed to minimize the volatility of the price of the stablecoin, relative to some "stable" asset or basket of assets. A stablecoin can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities. Stablecoins redeemable in currency, commodities, or fiat money are said to be backed, whereas those tied to an algorithm are referred to as seigniorage-style.
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