Maker mkr

US$2,469.77 0.72%

Collective Shift Analysis

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Maker Summary

Maker is a protocol that uses a set of smart contracts to essentially function as a decentralised bank that issues a stablecoin called Dai (DAI) to borrowers, who must deposit supported cryptocurrencies at varying collateral ratios exceeding 1:1 (i.e. overcollateralised loans).

The protocol is managed by MakerDAO, a governance community consisting of holders of the MKR token. The DAO earns revenue through interest charged on loans (i.e. lending fees). It also earns income from certain interest-bearing assets such as tokenised U.S. Treasury bonds.

maker graphic stakeholders

MKR Token Utility

Maker has a two-token model:

  • Maker (MKR) is a governance token used to vote on various aspects of the Maker protocol (e.g. technical upgrades, risk parameters, collateral types).
  • Dai (DAI) is a collateral-backed stablecoin soft-pegged to the U.S. dollar. To mint DAI, users must over-collateralise a loan with governance-approved assets.

Of MKR’s value drivers, one of the most direct ones is the so-called Smart Burn Engine, a system of smart contracts that uses excess DAI to buy MKR from the MKR–DAI market on Uniswap v2, match the MKR with additional DAI, and supply the matched MKR and DAI to the same market. All else being equal, this process effectively removes MKR from circulation and increases the token price. (Crucially, the engine only executes when MakerDAO has a surplus buffer of more than 50 million DAI.)