MKR represents the decentralized governance token for the MakerDAO DeFi lending platform, launched on the Ethereum blockchain
MakerDAO is a leading decentralized finance protocol under the governance of an autonomous organization (DAO), developed in 2014 and launched in 2015. Through the platform, users can borrow the native stablecoin of the DAI platform by collateralizing other cryptocurrencies, in order to reduce the impact of cryptocurrency market volatility. The founder of the project is Rune Christensen.
Holders of MKR tokens are entitled to administer the entire MakerDAO ecosystem. They primarily use voting as a means of administration. One Maker token equals one vote.
Eligible topics for voting:
- Risk management for collateral assets.
- Types of collateral available on the platform.
- Interest rates for DAI deposits.
- Changes to the protocol's oracles.
- Platform shutdown.
- System updates.
- Allocation of funds from Maker reserves towards infrastructure projects.
It is up to all users of the platform, not just MKR holders, to decide which issues should be voted on.
MKR's additional utility
MKR tokens' utility transcends the management sphere. MKR tokens' utility transcends the management sphere. Additionally, these are essential for recapitalisation, value stabilization, commission fees, and may even serve as alternative payment methods.
Recapitalization requires changing the capital and debt structure of the protocol by regulating the number of tokens. For instance, should the platform's debt become excessive, the supply of MKRs could be increased through a special collateral auction. Such an element of collaboration with asset holders is essential for responsible management and the elimination of unnecessary risk.
Additionally, the platform's own token keeps DAI's value at $1, preventing abrupt volatility of the Stablecoin. By issuing new MKRs and burning tokens, this is accomplished.
If a user wants to create a DAI, a deposit in another cryptocurrency is required on the MakerDAO platform. However, a stabilization fee has to be paid in Maker coins to create a smart contract. This smart contract is then burned to reduce the number of MKRs in circulation on the market.
After all, these tokens can also be spent in online shops - those supporting the asset - and used to pay transaction fees on the Ethereum network.
Maker (MKR) Tokenomics
The token has a market cap of $744 million at the end of February 2023. There are 977,631 MKRs in circulation. Currently, the maximum supply is set at 1.005 million euros and will be adjusted according to market conditions and DAI's stablecoin conditions.
The tokens were initially distributed to holders, founders and investors during a public sale in 2017. Out of the one million tokens created, 472,000 were allocated to early holders, while the rest was allocated to the development team and project sponsors.
In addition to the initial distribution, MKR tokens can be earned by participating in platform governance and by helping stabilize the DAI exchange rate. Incentives are allocated in proportion to the number of coins held by the user. What a great way to encourage activity!
How MakerDAO works
The DeFi platform is built on the Maker protocol, developed after Ethereum, and uses smart contracts. Every transaction within DeFi is automatic, with no third party regulation involved.
DAI Stablecoins, the pledged cryptocurrency vault as collateral, Oracles, and the Maker token voting platform are all components of the platform.
Once a user borrows from MakerDAO, new DAIs are being created in the protocol to be lent. Stablecoin is equated to the value of a dollar, though its collateral hinges on other cryptocurrencies locked up on the platform. Only assets launched on the Ethereum network and admitted by MKR holders are eligible for collateral. More than 2.1 million ETH is locked up in MakerDAO contracts to maintain the value of the DAI stablecoin.
