Maker (MKR) Things You Need To Know Before Investing
What Is Maker (MKR)?
Maker 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, MKR 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 give the holders voting rights over the development of Maker Protocol and are expected to appreciate under the success of DAI itself.
The MKR 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.
Who Are the Founders of Maker?
MakerDAO, the first entity inside the larger Maker ecosystem, was created in 2015 by Rune Christensen, an entrepreneur from Sealand, Denmark.
Christensen graduated from Copenhagen University with a degree in biochemistry and studied international business at the Copenhagen Business School. Before MakerDAO, he co-founded and managed the Try China international recruiting company.
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 is that it allows its holders to participate in governing DAI directly. Every holder of MKR tokens has the right to vote on many 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 particular 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 MKR ecosystem;
- Upgrades to the platform.
This ability to participate in managing one of the largest stablecoins on the market 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 are 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 deposited by users when minting new DAI tokens stored in so-called vaults — intelligent contracts on the Ethereum blockchain.
During price downswings, the value of crypto stored in the vault might become insufficient to collateralize the corresponding amount of DAI fully. In that case, the Maker Protocol automatically initiates the liquidation of the vault’s contents, the proceeds it uses to cover that vault’s obligations. If the amount of DAI generated during the liquidation is not enough, the MKR Protocol mints new MKR tokens to sell and cover the remaining sum, 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 MKR 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.
How Is the Maker Network Secured?
MKR is an ERC-20 token, meaning that it runs on and is secured by the Ethereum blockchain. Ethereum, in turn, is secured by its Ethash proof-of-work function.
Where Can You Buy Maker (MKR)?
Maker token trading is available on such exchanges as:
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