As a smart contract system built on Ethereum, MakerDAO itself is a decentralized autonomous organization. Dai is a stable currency of MakerDAO. It can be automatically adjusted according to the exchange rate changes in the international market, so as to keep its value against the world's major currencies stable and ensure 1Dai=1 US dollar. This feature is similar to USDT. The purpose of MakerDAO is to minimize the price fluctuation of Dai and IMF's international currency basket.
In the MakerDAO system, besides Dai, MKR also has to be mentioned. MKR coin is the management token and utility token of the Maker system. It is used to pay Dai's stable expenses and participate in the management of the whole Maker system. Unlike the linkage between MKR and Dai and the dollar value, the value of MKR is closely related to the whole system, and it can only be used in Maker's system.
The real goal and vision of MakerDAO is to implement all the advantages of blockchain technology in a way that can truly solve practical problems for people. Provide inclusive finance for those currently excluded from the global financial system. So that hundreds of millions of people who do not even have bank accounts can really obtain stable and reliable currency through Dai. It is worth mentioning that after years of development, MakerDAO has been applied in margin trading, international transfer, collateralized loan, supply chain finance and other aspects, and has made another step towards its own goal.
How does MKR Work?
Maker is the complete system and decentralized autonomous organization (DAO) behind Dai. If Dai is the base currency, Maker is actually a decentralized financial system. The creation method of Maker on-chain collateralization provides the financial market with liquidity that can be adjusted with demand, and also eliminates the inflation risk caused by unlimited money printing, because there are sufficient assets behind the collateralization. In addition, Maker has no counterparty risk and is limited by the influence of the center. Dai is generated on the chain contract, and there is no risk of centralized trusteeship. Even the Maker development team cannot tamper with and transfer users' assets. Maker's mechanism hopes to better realize inclusive finance by reshaping a monetary system.
What is MKR？
MKR is a managed and equity token in the entire MakerDAO system.
（1）Management: MKR holders can participate in the voting of seven risk system behaviors, including adding new collateralized debt positions, modifying existing collateralized debt positions, modifying sensitive parameters, modifying target price change rate, selecting trusted oracle, adjusting price feeding sensitivity, and selecting global liquidators. Meanwhile, the MKR holders can also participate in modifying the four risk parameters in the collateralized debt positions (CDP) in the Dai stablecoin system: debt cap, liquidation ratio, stabilization fee and penalty ratio.
It can be said that the MKR holders control the operation of the system. How is MKR allocated in the system?
Presently, the total volume of MKR is 1 million, 61% of which are circulated in the market, 39% are allocated to the foundation and 15% to the core team. The specific allocation mechanism of MKR is not clear, and there is no crowdfunding. Currently, 73.67% of the top 10 positions are held, and 81.85% of the top 25 positions are held. Among them, the investment institution a16z ranks fourth in terms of holdings.
（2）Equity: when users redeem the collateralized Ethereum, they need to pay MKR as a stabilized fee. In this case, MKR will be burnt. As more and more people use Dai, more and more stabilized fees will be paid, more and more MKRs will be burnt, and MKRs will become more and more valuable. In this sense, MKR can be regarded as a deflation system, and the holders of MKR can benefit from the wide use of Dai.
There is one situation that will cause the system to issue additional MKRs: if the collateral price plummets in a short time and falls below the liquidation ratio, and the collateral assets can not support the circulation of Dai, the system will confiscate the assets and auction them to repay the previously lent Dai (for the system, each Dai issued means one Dai in debt).
The system began to issue MKR and sell MKR to buy Dai. Then, the system sells the collateralized assets in the form of public auction, and uses the raised Dai to repurchase and burn MKR.
In this case, the MKR holders became the last person to reveal the bottom of the system. The MKR holders enjoy the benefits of system growth and also bear the risk of system crash.