A Beginner's Guide
MakerDAO is a decentralized software platform built on Ethereum that governs the DAI stablecoin, a cryptocurrency pegged to the US dollar. As a pioneer in decentralized finance (DeFi), MakerDAO operates within the broader Maker Protocol, which uses a combination of crypto assets to maintain DAI’s stability without relying on traditional banks or governments.
The Maker Protocol relies on two key tokens:
- DAI: The stablecoin generated when users collateralize cryptocurrencies (e.g., ETH) to borrow DAI.
- MKR: The governance token that lets holders vote on protocol upgrades and risk parameters.
👉 Learn how to stake MKR for voting power
How DAI Works
Users lock crypto (e.g., ETH) in Maker Vaults to mint DAI loans. If the collateral’s value drops below a threshold, it’s automatically liquidated to stabilize DAI’s peg.
MKR’s Role
MKR holders vote on critical decisions, such as:
- Approved collateral types (e.g., ETH, BAT).
- Liquidation ratios.
- Adjustments to the DAI Savings Rate (DSR).
How MakerDAO Functions
Governance Structure
- Proposal Polling: MKR holders gauge support for changes.
- Executive Voting: Approved proposals modify the protocol’s code.
- Community Input: Non-holders can suggest ideas via MakerDAO forums.
👉 Explore MKR governance in action
Voting Power
Decisions are weighted by MKR tokens staked—not the number of voters. Example:
- Proposal A: 10 voters with 1,000 MKR.
- Proposal B: 5 voters with 5,000 MKR.
Outcome: Proposal B wins (more MKR backing).
Key Features
DAI Savings Rate (DSR)
MKR holders adjust the DSR to maintain DAI’s $1 peg:
- DAI > $1: Lower DSR to reduce demand.
- DAI < $1: Raise DSR to incentivize holding.
Historical DSR: Ranged from 0% to 8.75% APY.
Tokenomics
- Surplus Auctions: Excess fees buy back/burn MKR (deflationary).
- Debt Auctions: New MKR minted if collateral underpays (inflationary).
No supply cap: MKR’s value hinges on protocol health.
Creator & Evolution
- 2015: Founded by Rune Christensen.
- 2017: Raised $12M from Andreessen Horowitz, Polychain Capital.
- 2019: Expanded to Asia with $27.5M funding.
Why Hold MKR?
- Governance: Shape MakerDAO’s future.
- Speculation: Bet on protocol adoption.
- Deflation Potential: Well-managed surpluses burn MKR.
Risks: Poor governance could inflate MKR supply.
FAQ
1. What collateral does MakerDAO accept?
As of 2025, ETH, BAT, and MANA are approved.
2. How is DAI kept stable?
Through automated liquidations and DSR adjustments.
3. Can anyone vote in MakerDAO?
Only MKR holders.
4. What happens if DAI loses its peg?
MKR holders vote to alter the DSR or collateral requirements.
5. Is MKR a good investment?
Potentially—if MakerDAO grows sustainably.