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Algorithmic stability: MakerDAO and DAI in 5 🖐

Algorithmic stability: MakerDAO and DAI in 5 🖐
By Fernando Gutierrez • Issue #62 • View online

What are Maker, MakerDAO, MKR, and DAI? 💰
Maker is one of the first and most well-known projects on DeFi. It was launched in 2015 on Ethereum with the task of creating the first decentralized stablecoin, DAI.
It has a soft peg to the US dollar that is maintained with a set of smart contracts.
Unlike centralized stablecoins like USDT or USDC, DAI doesn’t have a central entity that holds dollars in reserve.
The Maker protocol allows anyone to deposit crypto assets and get DAI in exchange. The borrower of DAI has to pay interest on the DAI, the Stability Fee.
The system is overcollateralized: the amount of DAI received is lower than the value of the deposits, which the protocol liquidates if the prices fall. This ensures that there is always enough crypto to maintain the peg. The user can send back the DAI anytime and recover the deposit.
Users who hold DAI in a special smart contract can also receive a yield on their tokens. This is the Dai Saving Rate. The Stability Fee and the Dai Savings Rate rates influence the supply and demand of DAI and help maintain the peg.
MKR is the governance token of the system. It gives voting rights on MakerDAO, the decentralized entity that manages the Maker protocol and DAI.
Maker DAO decides which assets can be accepted, their risk parameters, the Stability Fee, the Dai Savings Rate, choose the oracles, and decide on upgrades to the protocol.
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Of course, this is not financial advice yada yada yada.
Loses are a fact of the market, so learn to live with them and make decisions accordingly. You are your loses, and your loses are you.
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Fernando Gutierrez

I'm catching up with crypto projects and concepts in a few paragraphs for at least 50 days straight.

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