Maker (MKR) A Better, Smarter Currency

What Is Maker (MKR)?

Maker (MKR) is the governance token of the MakerDAO and Maker Protocol — respectively a decentralized organization and a software platform, both based on the Ethereum blockchain — that allows users to issue and manage the DAI stablecoin.

Initially conceived in 2015 and fully launched in December 2017, Maker is a project whose task is to operate DAI, a community-managed decentralized cryptocurrency with a stable value soft-pegged to the US dollar.

MKR tokens act as a kind of voting share for the organization that manages DAI; while they do not pay dividends to their holders, they do give the holders voting rights over the development of Maker Protocol and are expected to appreciate in value in accordance with the success of DAI itself.

The Maker ecosystem is one of the earliest projects on the decentralized finance (DeFi) scene: the industry that seeks to build decentralized financial products on top of smart-contract-enabled blockchains, such as Ethereum.

How Does MakerDAO Work?


At launch, 1 million MKR tokens were created to govern the Maker protocol.

Anyone who owns these MKR tokens can cast a vote on key decisions using a process known as Executive Voting. If an Executive Vote is passed, then the code in the Maker Protocol is changed to reflect the winning proposal. 

However, before an Executive Vote can be carried out, another form of voting must first take place. This is called Proposal Polling, and it’s a way for MKR holders to gauge sentiment on a proposal before committing any changes to the software. 

third type of vote can be cast by non-MKR holders using threads in the MakerDAO forum. 

But while anyone may make proposals to MakerDAO, only MKR holders can vote on them. A vote is then measured by the amount of MKR tokens committed to a proposal. 

For example, if 10 holders with 1,000 MKR vote for Proposal A, while 5 holders with 5,000 MKR vote for Proposal B, Proposal B wins because more MKR tokens support it. 

Only the number of tokens, not the number of token holders, influences the vote’s outcome. 

DAI Savings Rate

Importantly, MKR holders can decide how much DAI holders earn if they save DAI on the platform. The amount DAI holders earn for doing this is known as the DAI Savings Rate. 

The DAI Savings Rate has been as high as 8.75% per annum, and as low as 0%. In fact, the current savings rate is set at zero due to a market crash in March that caused DAI to trade significantly above $1. 

In the aftermath of the crash, MKR holders voted to set the DAI Savings Rate to 0% to encourage the sale of DAI, which would bring the price of DAI closer to $1. 

In this case, MKR holders voted in-line with expectations. 

When the price of DAI rises above $1, MKR holders are expected to vote to decrease the savings rate to reduce demand, causing the price to fall. 

If the price of DAI is under a dollar, then MKR holders should vote to raise the savings rate to increase demand to hold DAI, thus causing the price to rise. 

What Is Dai?

Dai (or DAI) is a decentralized, unbiased, collateralized stablecoin soft-pegged to the US dollar. This may sound complicated, but in essence what it means is that it’s a cryptocurrency whose price roughly follows the value of the dollar – without the need of a central authority.

While blockchain technology presents exciting new opportunities for the finance industry, many are reluctant to use Bitcoin as a medium of exchange because of its incredibly volatile nature. This is why Dai was created – to meet the demand for a more stable digital currency that enables us to realise the full potential of blockchain technology.

Dai is unbiased because it isn’t managed by a private company, like other stablecoins such as USDT, and it’s collateralized because new Dai can only be minted by a Maker Protocol user who deposits an appropriate amount of other cryptocurrencies into a smart contract in order to back the new DAI being minted. Dai holders can also use the Maker Protocol to earn interest on their stablecoins, with the amount being determined by the Dai Savings Rate.

Who Are The Founders Of Maker (History of Maker)?

The history of the Maker ecosystem went through various stages, the first of which was the MakerDAO. This was created in 2014 by Rune Christensen, a Danish entrepreneur and graduate of the University of Copenhagen. After studying international business and biochemistry, Christensen co-founded the recruitment company Try China before moving into blockchain.

Dai was officially launched on the Ethereum network in 2017, followed the next year by the formation of the Maker Foundation, an organization which aims to fuel growth of the ecosystem and is spearheading efforts to decentralise development. Christensen serves as CEO of the foundation, while others on the board include President and COO Steven Becker, who previously founded Cubit Capital, and economist Shefali Roy.

Initially, Ethereum was the only asset that could be collateralized through Maker Protocol, with the Dai generated being known as Single-Collateral Dai or Sai. In 2019, the MCD system was implemented, so today, any type of Ethereum-based asset that has been approved by the community of MKR holders can be deposited.

Maker Community Governance

MKR holders can engage in ecosystem governance. Users have more influence over the network’s future, thanks to community governance. The decentralized governance process in the Maker ecosystem is based on Active Proposal smart contracts. These contracts give users more control over the system and increase accountability.

To help preserve its value over time, MKR uses a deflationary protocol. When a CDP smart contract closes, a small interest fee in MKR is due as part of the scheme. A portion of the price is lost.

The system would maintain a healthy balance between supply and demand for this digital commodity in this way. Maker’s developers realized that tokens can’t be issued indefinitely without losing value.

Deflationary protocols are becoming more popular in the DeFi market, and for a good reason. Because of their incentive token issuance policies, early DeFi platforms are prone to inflation.

What Makes Maker Unique?

As of October 2020, DAI is one of the most popular stablecoins (cryptocurrencies whose prices are pegged to the USD or another traditional currency). It is the 25th largest cryptocurrency at over $800 million in market capitalization and it has more active addresses than USDT — the largest stablecoin on the market.

MKR’s unique proposition lies in the fact that it allows its holders to directly participate in the process of governing DAI. Every holder of Maker tokens has the right to vote on a number of changes to the Maker Protocol, with their voting power depending on the size of their MKR stake. Some of the aspects of the protocol the holders can vote on are:

  • Adding new collateral asset types to the protocol, allowing users to submit new cryptocurrencies to mint more DAI;
  • Amend the risk parameters of existing collateral asset types;
  • Change the DAI Savings Rate: holders of DAI tokens can earn savings by locking them in a special contract, and the Savings Rate impacts the profitability of that contract;
  • Choose the oracles — entities whose goal is to supply trustworthy off-blockchain data to the Maker ecosystem;
  • Upgrades to the platform.

This ability to participate in the management of one of the largest stablecoins on the market is what drives the demand for MKR tokens and correspondingly affects their value.

How Many Maker [MKR] Coins Are There In Circulation?

The issuance and removal of MKR from the system is governed by a complex system of interdependent mechanisms designed to ensure that DAI is always fully collateralized by other cryptocurrency assets and its soft peg to the USD is maintained. There is no hard-coded limit on the total supply of MKR.

DAI’s value is secured by collateral — other cryptocurrencies that are deposited by users when minting new DAI tokens and stored in so-called vaults — smart contracts on the Ethereum blockchain.

During price downswings, the value of crypto stored in the vault might become insufficient to fully collateralize the corresponding amount of DAI. In that case, the Maker Protocol automatically initiates the liquidation of the vault’s contents, the proceeds of which it uses to cover that vault’s obligations. If the amount of DAI generated during the liquidation is not enough, the Maker Protocol mints new MKR tokens to sell and cover the remaining sum, thereby increasing the total supply.

However, in some cases, the amount of DAI made from the auctions exceeds the necessary limit to ensure full collateralizations — then, it is used by the Maker Protocol to buy back and burn MKR tokens, decreasing their total supply.

Thus, the supply of MKR is a dynamic value that changes depending on market conditions and the overall health of the DAI ecosystem. As of October 2020, the circulating supply of Maker tokens is about 1 million, worth more than $500 million.

Maker (MKR): The Vast Potential

For payments, integrating MKR on dapps enables settlement of payment whenever, wherever. The confirmation of such transactions gets processed in a fraction of seconds. This happens due to faster block generation times wherein the fees are the lowest. Maker provides APIs/SDKs for dapps, merchants, and users to instantly accept or pay in crypto assets like ERC20 tokens, ETH, and others. Maker enables decentralized exchanges to offer expeditious and inexpensive trades for their users. Integration with Maker helps these exchanges to run on steroids, making them trustworthy and secure. No wonder these decentralized exchanges drive the future of digital assets.

Maker reinforces gaming networks, thereby speeding up their performance in processing transactions. Maker also acts as a Lending & Credit scoring platform for merchants. The traders can ascertain the worthiness and credibility of their borrowers, viewing their transaction history facilitating lending of tokens to those who stand a better chance of timely repayment.

Maker users can easily access many financial service applications like DEXs, Lending dapps, and many others. Ultimately, it can be seen that Maker (MKR) has endeavored an exemplary move to enhance customer experience facilitating the user-friendly implementation of tools.

Maker Coin Use Case

Maker coins serve as governance tokens which guarantee their owners the right to vote on any important decision related to the platform. These include risk management, payment of Dai loans or setting the debt ratio. If one wants to take the loan in Dai, the Maker coin is used for the payment of related 1% interest rate.

The MKR coins also operate as the utility tokens used for the payment of the fees relating to the collateralized debt position (CDP) mechanism which allows for the generation of Dai. With the payment of fees, the MKR coins are removed from the supply, with the demand for them rising together with the demand for the Dai coin. New MKR coins are generated automatically by the Maker platform in case any portfolio is identified as undercollateralized. In this manner, the coin is used to improve the solvency of the entire Maker ecosystem.

What Problems Does Maker (MKR) Solve?

Maker attempts to rectify multiple issues encountered in the traditional financial sector. The platform combines a unique selection of proprietary technologies to accomplish this task. Maker functions as a critical part of the DeFi community. DeFi refers to the ever-growing sector of decentralized financial institutions. The goal of DeFi is to provide viable solutions to the current centralized financial services available to the public.

Transparency Issues

One of the main problems that Maker attempts to correct is transparency. The network utilizes smart contracts to eliminate the need to trust any party. Currently, major stable coins such as Tether USD require you to put faith in the network’s reserves. In most cases, you are left to rely on third-party auditors to verify the company’s holdings. 

Maker eliminates this need to trust centralized organizations. You don’t need to wait on external audits or company statements. The entire network is trackable via the blockchain. Maker goes a step further. For example, the company’s staff publishes recordings from every meeting on a company SoundCloud page for all users to review. 

Volatility

The core function of MKR is to ensure that DAI remains pegged to the dollar. This dual crypto strategy helps to prevent volatility and provides users with more security in terms of the project’s resilience.

Benefits Of Maker (MKR)

Maker continues to see growing popularity mainly because it brings a lot of benefits to the market. This unique token serves multiple purposes within the Maker ecosystem. These functionalities add to the overall usability of this token. Here are some of the main benefits you gain when you hold MKR.

Community Governance

MKR holders are able to participate in the governance of the ecosystem. Community governance provides users with more control over the future of the network. In the Maker ecosystem, the decentralized governance mechanism relies on Active Proposal smart contracts. These contracts are structured to provide users control over the system and to ensure a higher degree of transparency throughout the platform.

Deflationary

MKR employs a deflationary protocol to help maintain its value over time. As part of this system, a small interest fee in MKR is due whenever a CDP smart contract closes. A portion of this fee gets burned. In this way, the system can maintain a healthy balance between the supply and demand of this digital asset.  

Deflationary protocols are becoming a standard feature in the DeFi sector and for good reason. Early DeFi platforms are susceptible to inflation due to their reward token issuance policies. Maker’s developers understood that you can’t continuously issue tokens without any degradation in value. 

Maker vector (SVG) logo | Download on logowiki.net

Advantages

Disadvantages

• Maker has one of the highest total value “locked” (TVL) in a DeFi application at around $15.5 billion.

• Because Dai is collateralized it can be impacted by the value of other crypto.

• Over 400 apps and exchanges now use Dai and it’s a common trading pair within the DeFi ecosystem.

• The March 2020 Ether price collapse and network congestion indicated some systemic risk to Maker.

• MKR coin holders can vote on how the platform runs and oversee Dai.

• Because Dai’s stability is predicated on collateralization and incentive mechanisms it is more volatile than its fiat-backed counterparts and rarely trades at exactly $1.

• Maker accepts multiple assets as collateral, including centralized stablecoins and assets.

Experts’ Take On Maker (MKR) Price Forecast:

While some experts have an optimistic view on Maker forecasts’ future price, stating the coin may outperform its rivals in prices, others hold their cards close to their chest about its fall.

Based on our Maker price forecast, a long-term increase is expected: the price predictions for 2027 is $4049.370. With a 5-year investment, the revenue is expected to be around +98.75%.Wallet Investor

The most significant landmark victory for Maker is that the future price would cross $6070, and it will be worth it to bet on Maker with the least price change. With increased price risk of fall, we could recommend Maker (MKR) to be a reasonably good short-term investment, though.Reddit Community

Maker price prediction for 2022 is somehow fluctuating as the average price is predicted to cross $2,216.091 by the end of 2022; the expected maximum price at the end of 2023 could be $2,807.539.Trading Beasts

According to our Maker price predictions, the token might cross $2,792.53 by the end of 2022 and $4,243.27 by 2026.Digital Coin Price

The coming years will appear as a smooth time for Maker (MKR) as there could be an extension to the alliances and emerging innovations that will raise its price to $4261.71889 by the end of 2022 and $19925.77 by 2026.GOV Capital

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