Maker is an Ethereum blockchain based cryptocurrency that functions as a smart contract platform.
Along with Dai coin, Maker moves forward with a view to providing the customers a stable alternative when most of the cryptocurrencies in the stock have to face volatility issue.
Rune Christensen founded MakerDao three years back, and he is acting as the CEO of the organization currently.
What is DAI coin?
Maker Dai formally started its journey from 18 December 2017. As the users do not have to worry about the stability of its price, they are using it as a medium for savings, payments or collateral.
It also creates new options related to opening and closing positions for the crypto-traders. Running on the Ethereum blockchain, it keeps its stability untouched by the trusted counterparties or the legal system and positively catalyzes trading.
The philosophy of stable coin is quite simple. A cryptocurrency being stable means that its price is pegged to a definite fiat currency, the US dollar in this case. A stable coin is likely a token similar to Ethereum or Bitcoin running on a blockchain, except it avoids volatility.
An example of a stable coin that is familiar to concerned people is Tether. Via the Omni Layer protocol, it was executed on the blockchain of Bitcoin. The frequency of this essentially centralized token was set to US dollar, and the authority of creation and destruction was in the hand of Tether Limited.
Stable coins enable the traders to operate more methodically without touching fiat currency. Due to the risk of volatility, most of the cryptocurrencies are also not suitable for being used as the means of collateral or direct payments.
Maker, being a smart contract platform, implies CDPs, autonomous feedback mechanism, and motivated external factors to maintain the stability of Dai.
How does it work?
The functional procedure of MakerDai is quite similar to that of Tether. They both are non-mineable collateral-backed properties, being related to US dollars. But, Dai is completely decentralized, and the mechanism is controlled by the market.
Users can generate Dai coins of their own with the help of Ether. At first, it needs to be wrapped into a compliant token and next, shifted into an MKR token before Dai is issued into an account.
Use cases for MakerDai
Many effective uses for Dai mentioned as “addressable market” are discussed by the MKR team in the official white paper.
Maker has expanded its arena in four huge business fields that handle high-scale trade now a day: financial markets, translucent accounting systems, international trade and gambling markets.
Active Collateral Debt Positions, having higher collateral values than the debt values, allow permissionless leveraged trading for financial markets, leverage, hedging, and derivatives. Dai also ensures efficient and transparent accounting system to the charities and governments.
Conclusion
The whole acting protocol restricts the exposition of volatility. In the whitepaper, the MKR has coined an example of bitcoin; how the price went south by 25 percent in a day and again, how it spiked over 300 percent in a month.
To unlock the full potential of blockchain technology, collateral-backed Dai is introduced, resolving volatility problem.
