MakerDAO is a decentralized credit platform on Ethereum that supports Dai, a stablecoin whose value is pegged to USD. Anyone can use Maker to open a Vault, lock in collateral such as ETH or BAT, and generate Dai as debt against that collateral. Dai debt incurs a stability fee (i.e., continuously accruing interest), which is paid upon repayment of borrowed Dai. That MKR is burned, along with the repaid Dai. Users can borrow Dai up to 66% of their collateral’s value (150% collateralization ratio). Vaults that fall below that rate are subject to a 13% penalty and liquidation (by anyone) to bring the Vault out of default. Liquidated collateral is sold on an open market at a 3% discount.
Holders of Maker’s other token (MKR) govern the system by voting on, e.g., risk parameters such as the stability fee level. MKR holders also act as the last line of defense in case of a black swan event. If system-wide collateral value falls too low too fast, MKR is minted and sold on the open market to raise more collateral, diluting MKR holders.
Maker also has a feature called the Dai Savings Rate (DSR). DAI holders can lock their DAI into Maker’s DSR contract and earn a variable interest rate in DAI, which is generated from stability fees.
How to use Maker?
The most popular place to use MakerDAO is Maker’s Oasis Portal. There you can open and manage Vaults, review your Vault’s history, deposit DAI into the Dai Savings Rate, and get up-to-date stats on the whole Maker system. We also have step-by-step guide.