Governance tokens have become fundamental to decentralized crypto projects, enabling token holders to participate in protocol decisions. MKR, the governance token for MakerDAO, plays a crucial role in maintaining the efficiency and stability of DAI, a decentralized stablecoin pegged to the US dollar.
What Is MakerDAO?
MakerDAO is a decentralized autonomous organization (DAO) that oversees the DAI stablecoin via the Maker Protocol. This system allows users to mint and manage DAI while ensuring its stability through mechanisms like over-collateralization. Key responsibilities of MKR holders include:
- Voting on protocol upgrades
- Adjusting risk parameters
- Managing DAI’s peg stability
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The Maker Team
Founded in 2015 by Rune Christensen, MakerDAO combines expertise in blockchain and decentralized finance. Christensen, a Danish entrepreneur with a background in biochemistry and international business, previously co-founded Try China, a recruitment firm.
How Does MakerDAO Work?
MKR holders engage in Executive Voting, where approved proposals directly influence protocol changes. Key functions include:
- Setting the DAI Savings Rate (DSR)
- Adjusting collateral requirements
- Incentivizing participation through rewards
MKR Tokenomics
Supply & Utility
- Total Supply: 977,631 MKR (fixed)
- Governance Rights: Voting on protocol upgrades
- Stability Mechanism: MKR is auctioned during undercollateralization to restore DAI’s peg
- Fee Settlement: Stability fees are paid in MKR, which is subsequently burnt (reducing supply)
Distribution Breakdown
| Allocation | Percentage |
|-----------------|------------|
| Founders & Project | 69.5% |
| Team | 15% |
| Seed Round 1 | 4% |
| Seed Round 2 | 6% |
| Seed Round 3 | 5.5% |
FAQs
1. What is MKR used for?
MKR enables governance in MakerDAO, allowing holders to vote on critical protocol changes and maintain DAI’s stability.
2. How is DAI stabilized?
Through over-collateralization and MKR auctions during deficits, ensuring DAI remains pegged to $1.
3. Can MKR supply increase?
No, the total supply is capped at 977,631 MKR, with burning mechanisms reducing circulation over time.
4. Who controls MakerDAO?
Decentralized governance by MKR holders, with no central authority.
5. How are MKR holders rewarded?
Active participants earn rewards for voting and contributing to protocol improvements.