Maker is an attempt to reign in the biggest problem of cryptocurrency- volatility. Volatility isn't necessarily a bad thing for an asset, but when it is used as a currency, the stability of it is paramount. Maker generates DAI coin, which is pegged to the US dollar 1:1. The blockchain is based on Ethereum, and there has been increasing integration of it into dapps, pointing to a promising future.
What is it?
Maker is the projects name, and under it there is two different coins- DAI and MKR. Dai is the stablecoin, and MKR allows users to vote on the network, so it possesses far more speculative value. Stablecoins are only as good as their backing, and DAI is backed by multiple coins, such as BAT and ETH. As they are more developed, they are supposed to be safer and more reliable. While the intentions are good, history shows that they still possess incredible volatility. As the peg is soft, there is slight fluctuations of value around the USD, mostly stemming from the changes in th value of their backing.
What is DAI?
As explained before, DAI is a decentralized stablecoin that is backed by an excess of other tokens, attempting to peg the USD. Therefore, it is attempting to create a pure form of digital money. The end goal of it is to be accepted as a means of exchange at multiple different online stores, revolutionary in DeFi. DAI can also be generated. This is done by users placing collateral in the form of ETH, and in return receiving an amount determined by an algorithm. The collateral is placed in something called maker vaults, which are just smart contracts. These can be created from a series of providers, but all use the same protocol. Once this is done, there is an obligation to pay off the debt in DAI, along with a stability fee which is where the vault provider can earn some money. This means that the amount of DAI is continually changing, but this doesn't matter as the amount of collateral is changing with it, so unless there is an extreme amount of speculation surrounding it, the soft peg should remain.
DAI can also be placed into saving accounts, where they can earn interest on it. This is done by locking the coins into a contract on the Maker Protocol. This further legitimizes the coin, as if it is a means of transaction, than it should also be able to be placed into bank like institutions.
What is MKR?
MKR is the governance system surrounding the project. Each token allows the holder to have a say in the future of the project. Governance and MKR is inseparable, as without one there cannot be the other. Interestingly, one doesn't have to be a holder of the token to submit a proposal to the developers. This makes sense, as some may believe that they don't want to hold the coin unless they change something. This is unlikely, but it is a necessary part of making it unbiased- anybody can have a say. There is two types of voting, polling and executive votes. Polling is where some of the community is surveyed to get a rough judge of the sentiment. This can lead to Executive votes which is where every token holder is asked to vote yes or no for a change.
Another role of the MKR token is to recapitalize the DAI collateral if it falls below a certain point, putting it in jeopardy. Here, a debt auction than takes place. This is where MKR is minted and then they can be bidder for in DAI, reducing the amount in circulation, thus stabilizing the system.
Personal Opinion?
I believe that this is an interesting project, and it has far more scale than most other stablecoins. It also has a good community, with many apps and services integrating DAI. No matter how good of an idea a project is, if there is nobody to accept it, then it is a failure. DAI appears to be avoiding this, so there is a chance for this project to have quite a bright future. It all comes down to the community. They make the changes, so if they have passion, then there is a bright future. DeFi certainly has plenty of options looking forward!
Thanks for reading, until next time!
James Clarke