What is Maker
Maker (MKR) is a peer-to-contract lending platform that allows for over collateralised loans by encrypting Ether in a smart contract and issuing a stablecoin tied to the US dollar known as Dai. Dai's stability comes from a dynamic system of collateralised debt positions (CDP), autonomous feedback mechanisms, and external actor incentives. Dai may be freely distributed to others, used as payment for products and services, or saved long-term.
A Brief History of Maker
The Maker protocol began in 2014 to develop a permissionless credit system. They aim to enable users to borrow money using cryptocurrency as collateral. Smart contracts generate these loans by minting DAI, a stablecoin with a soft peg to the US dollar.
The Maker Foundation developed the protocol in collaboration with various third parties, and the foundation has attempted to lessen its degree of control over time. They eventually handed over power to MakerDAO, a decentralised autonomous organisation (DAO) that oversees the protocol. The DAO consists of people worldwide who possess the MKR token, allowing holders to vote on major changes.
MKR token is a mechanism for investors and borrowers to engage in the Maker ecosystem. Rune Christensen, the company's current CEO and a programmer established the project in 2015. The platform currently runs from Denmark.
MKR is a decentralised ERC20 token representing a stake in the Maker Project. The platform, for example, was one of the first-ever tradeable tokens on the Ethereum network. Maker is one of the most popular ETH-based platforms. More than 2.1 million ETH are locked up in Maker CDP Contracts.
How Maker Works
MKR serves a variety of functions in the Maker system. The token can pay for transaction fees on the Maker system. MKR may be transmitted and received by any Ethereum account, or smart contract configured to utilise the MKR transfer function.
Unlike other cryptocurrencies, MKR is only generated or burnt in reaction to changes in the price of DAI. The system applies external market mechanisms and economic incentives to keep DAI's value tightly pegged to US$1. Surprisingly, DAI is never precisely $1. In most cases, the MKR hovers around $0.98 and $1.02. The protocol destroys the MKR token after a smart loan contract completes.
Maker offers two unique cryptocurrencies, DAI and MKR, as part of its initiating strategy. Besides that, the network incorporates three primary mechanisms to stabilise DAI, even during harsh market downturns.
MKR also serves as the network's primary governance token. Users now have a voice in risk management decisions. Users can cast votes on a broad range of issues, including additional CDP types, changes to the sensitivity, risk parameters, and whether or not to initiate a worldwide settlement.
What is Maker Used for
Maker seeks to address several challenges in the conventional financial sector. The platform combines a one-of-a-kind collection of proprietary technologies to achieve this objective. Maker is now an essential platform for the DeFi community. DeFi aims to give viable solutions to the public's current centralised financial services.
Transparency is one of the primary problems that Maker seeks to address. The network employs smart contracts to remove the need to trust any entity. Major stable currencies like Tether USD demand you to place your trust in the network's reserves. Most of the time, you must depend on third-party auditors to verify the company's assets.
