Maker

Introduction to Maker

MakerDAO is the protocol behind DAI, one of the most important stablecoins in cryptocurrency and a cornerstone of DeFi. Launched on Ethereum in 2017, Maker pioneered the concept of decentralized, overcollateralized stablecoins - digital dollars backed by crypto assets rather than bank deposits.

The protocol’s governance token, MKR, gives holders control over risk parameters, collateral types, and protocol direction. Maker’s longevity and the persistent demand for DAI have established it as essential DeFi infrastructure.

The DAI Stablecoin

How DAI Works

Overcollateralized stablecoin:

• Users deposit collateral (ETH, etc.)
• Mint DAI against collateral
• Maintain minimum collateral ratio
• Repay DAI to withdraw collateral

Stability Mechanism

Maintaining the peg:

• Overcollateralization requirement
• Liquidation for undercollateralized positions
• Stability fees adjust supply
• DAI Savings Rate affects demand

Types of DAI

Evolution:

• Single-Collateral DAI (Sai): Original, ETH only
• Multi-Collateral DAI (Dai): Multiple collateral types
• Current system uses many assets

How Maker Works

Vaults

Creating DAI:

1. Open vault with collateral type
2. Deposit collateral
3. Generate DAI up to collateral ratio
4. Pay stability fee (interest)
5. Repay DAI to close vault

Collateral Types

Accepted assets:

• ETH and stETH
• WBTC
• Stablecoins (USDC)
• Real-world assets
• Many ERC-20 tokens

Risk Parameters

Governance-controlled:

• Debt ceiling per collateral
• Liquidation ratio
• Stability fee
• Liquidation penalty

Technical Specifications

Metric	Value
DAI Supply	$5+ billion
Collateral Types	20+
Min Collateral Ratio	130-175%
Stability Fee	Variable
DSR	Variable
Platform	Ethereum

The MKR Token

Governance

MKR enables control:

• Vote on proposals
• Risk parameter changes
• Collateral additions
• Protocol upgrades

Backstop Function

Emergency mechanism:

• MKR minted in shortfall
• Dilutes holders to cover losses
• Incentivizes good governance
• Last resort protection

Tokenomics

Supply dynamics:

• Initial supply: 1 million MKR
• Burns from stability fees (when surplus)
• Mints in shortfall (rare)
• Net deflationary historically

MakerDAO Governance

Decentralized Control

Community decisions:

• Executive votes for changes
• Polling for sentiment
• Delegates represent holders
• Transparent process

SubDAOs (Endgame)

Recent restructuring:

• Specialized sub-organizations
• Focused mandates
• Distributed responsibility
• Efficiency improvements

Endgame Plan

Major transformation:

• Rebranding to “Sky” ecosystem
• SubDAO structure
• NewStable and NewGovToken
• Diversified ecosystem

Real-World Assets

Expanding Collateral

RWA integration:

• US Treasury bonds
• Corporate credit
• Real estate
• Traditional finance bridges

Significance

Why RWAs matter:

• Yield generation
• Collateral diversification
• Mainstream integration
• Regulatory engagement

Risks

Considerations:

• Centralization concerns
• Custody requirements
• Regulatory exposure
• Trust assumptions

Competition and Positioning

vs. Other Stablecoins

Stablecoin	Type	Backing
DAI	Decentralized	Crypto + RWA
USDC	Centralized	Bank deposits
USDT	Centralized	Mixed reserves
FRAX	Hybrid	Algorithmic + collateral

DAI’s Advantages

Key differentiators:

• Decentralized issuance
• Transparent collateral
• Governance participation
• DeFi integration

Historical Significance

DeFi Pioneer

Maker’s contributions:

• First major DeFi protocol
• Proved decentralized stablecoins viable
• Governance token model
• Collateralized lending

Black Thursday

March 2020 crisis:

• ETH price crash
• Liquidation failures
• Zero-dollar auctions
• Protocol survived, adapted

Lessons Learned

Improvements made:

• Better liquidation mechanisms
• Diversified collateral
• Risk management
• Circuit breakers

Challenges and Criticism

Centralization Concerns

Current state:

• Large token holder influence
• RWA centralization
• USDC backing dependency
• Foundation role

Competition

Stablecoin landscape:

• USDC dominance
• New stablecoin entrants
• L2 stablecoin options
• Regulatory pressure

Complexity

Governance challenges:

• Technical decisions
• Voter apathy
• Coordination costs
• Scaling participation

Recent Developments

Endgame Implementation

Major restructuring:

• SubDAO launches
• Brand evolution
• Tokenomics changes
• Ecosystem expansion

RWA Growth

Traditional asset integration:

• Treasury allocations
• Yield generation
• Risk management
• Revenue diversification

Future Roadmap

Development priorities:

• Endgame: Complete transformation
• SubDAOs: Specialized organizations
• RWAs: Expand real-world assets
• Multi-chain: Cross-chain presence
• Governance: Improved participation

Conclusion

MakerDAO has demonstrated the viability of decentralized stablecoins over seven years of operation. DAI has survived market crashes, black swan events, and intense competition to remain a fundamental DeFi primitive.

The Endgame transformation represents the most significant change in Maker’s history, attempting to balance decentralization with efficiency and growth. Whether this restructuring succeeds will shape the future of decentralized stablecoins.

For those seeking to understand DeFi’s foundations, Maker provides essential context. Its governance, mechanics, and evolution offer lessons for the entire industry.