MakerDAO is an Ethereum-based decentralized protocol enabling collateral-backed loans without intermediaries. Its innovative DeFi integration has solidified MakerDAO as a cornerstone of the crypto ecosystem, leveraging smart contracts to manage borrowing and lending through two primary tokens: DAI (a stablecoin) and MKR (a governance token).
Key Features and Mechanics of MakerDAO
Dual-Token System: DAI and MKR
- DAI: An ERC-20 stablecoin pegged to the US dollar, designed to mitigate volatility. Users generate DAI by opening Collateralized Debt Positions (CDPs) using ETH as collateral.
- MKR: A governance token that empowers holders to vote on protocol upgrades and maintain system stability. Proposals can be submitted by any Ethereum address, but voting requires MKR ownership.
How Loans Work
- Collateralization: Users lock ETH into a CDP to mint DAI.
- Repayment: Upon loan repayment, the borrowed DAI is burned, and the collateral is released.
- Stability Fees: Interest rates (paid in MKR) adjust dynamically to balance supply and demand.
Where to Buy MKR Tokens
MKR is available on major exchanges, including:
- Coinbase
- Binance
- OKX
- KuCoin
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FAQs
What is the purpose of the MKR token?
MKR serves as MakerDAO’s governance token, allowing holders to vote on protocol changes and manage system parameters like stability fees.
How is DAI different from other stablecoins?
Unlike centralized stablecoins backed by fiat reserves, DAI is decentralized and collateralized by crypto assets (e.g., ETH), maintaining its peg through algorithmic mechanisms.
Can I participate in MakerDAO governance without MKR?
While anyone can submit proposals, voting rights are exclusive to MKR holders, ensuring alignment with the protocol’s long-term health.
Key Takeaways
- Decentralized Loans: ETH holders access liquidity without selling assets.
- Governance-Driven: MKR holders steer protocol evolution.
- Stability Mechanisms: DAI’s peg is maintained via smart contracts and community oversight.
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