Maker is a DAO short for a decentralized autonomous organization that works thanks to a token that was created in August 2017. The token was later distributed in December by the DAI Foundation and it is a part of a more extensive project that will lead to the birth of DAI, a so-called stablecoin. A stablecoin is a token pegged to a stable exchange rate (in this case Ethereum) and can be compared to a fixed exchange rate in the fiat currency world. How does DAI and MKR correlate? As mentioned, Marker is a decentralized organization commanded by the MRK token holders and it has a double purpose. The first purpose is to pay management fees for DAI when new tokens are created and the second purpose is “governance.”
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- Website: https://makerdao.com/
How Maker Works
Users that hold MKR tokens will, in fact, be called to vote on decisions related to the system such as assessing the risk to cover DAI emissions. This means that the MKR holders are directly responsible for the assets market valuation. MKR works by dropping in value when the usage of DAI increases because every DAI commission that is paid results in the destruction of an MKR token. Also, if an MKR holder makes an incorrect assessment it may result in the organization being forced to issue new MRKs, thus diluting the value of existing coins. As you can see, this system is very complex and it might be hard to understand. In an attempt to clarify it we have summarized the system as follows.
Lenders who borrow DAI in exchange for ETH are given tokens as warranty or collateral which effectively creates CDP – collateral debt position. Because of this, you can have DAIs that you can exchange for ETHs and potentially make a profit from. If the ETH that was used as collateral is returned they must be repurchased in DAI with an additional commission which will be paid to MKR holders.
Then there are the owners of DAI who have not given ETH in warranty but who simply hope that the token increases in value.
Finally, there are MKR holders that act as governors of the organization and vote on the collateral value as well as work to keep the value of DAI stable. These people act as final guarantors for the DAI loans in the event that the digital assets used as warranty (usually Ethereum) lose significant value. For this reason, it is important that MRK owners have a deep understanding of the market so that they can make accurate decisions when assessing the risk of the granted loans.
This utterly complex system is very young and so far only the MRK tokens exist. DAI is expected to be launched sometime during 2018 and we are eager to follow the development.
How to Buy Maker
If you are interested in buying Maker, you first have to buy either BTC or ETH and then transfer those coins to one of the following exchanges: Bibox.com, Gate.io, OkEx, OasisDex, IDEX, Radar Relay. We here at Bullmarketz.com recommend that you buy Bitcoin or Ethereum through a reliable exchange such as IQ Option.