Updated: Dec 20, 2019
Maker (MKR) is a recent cryptocurrency project implemented on the Ethereum platform. MKR is the native cryptocurrency of this project and is issued as an ERC-20 standard token, which cannot be mined. The stable coin DAI is produced by the Maker organization, which is not volatile and has its price pegged to the US dollar. MKR can be best described as a governance token, utility token and recapitalization resource of the Maker framework, which is backed by Ether rather than fiat currency.
This guide will talk about what Maker (MKR) is designed for, the team behind it, the way it works, and major uses.
What is Maker Designed For?
Maker (MKR) was designed to address the difficulties of other stablecoins like Tether and True USD, which lacked transparency even though they maintained their stability. These coins were often criticized for their low-transparency issues.
Maker project which was represented by MakerDAO created the DAI
coin with an inner MKR coin to stabilize the cryptocurrency. This approach can be compared to partially reserved banking, in which the bank is only required to maintain a small part of its deposit obligations.
It is important to understand that DAI is the stable coin, and MKR is the token with volatile pricing because of its role on the Maker platform. The collateral backing DAI is essentially Ethereum, instead of the US dollar or any other fiat currency.
Who Is the Team Behind Maker?
The ethereum-based token, Maker (MKR), was created by the founder and CEO of MakerDAO, Rune Christensen. Before creating MakerDAO and MKR, Christensen also served as co-founder of Try China. MakerDAO has a partnership with Request Network, CargoX, Digix, and OmiseGO, which gives MKR increased viability in the long run.
How Does Maker Work?
The maker has a total supply of 1,000,000 MKR in circulation. The token cannot be mined but is created or destroyed by Maker, in response to DAI price fluctuations. This is done to ensure that 1 DAI hovers around the $1 mark. MKR essentially collateralized the Maker system.
DAI is rarely ever touching the $1 mark and is usually between $0.98 and $1.02. Even DAI cannot be mined but is issued by purchasing a collateralized debt position (CDP), which in essence are Maker’s smart contracts that act as loans. Once the loan is paid off in full along with any MKR fees the smart contract is considered fulfilled and the DAI is destroyed.
MKR can be converted to ETH and DAI on Oasis Direct, which is MakerDAO’s decentralized token exchange platform. The platform also supports other ERC20 tokens existing on the Ethereum blockchain.
What are Current and Future Applications of Maker?
The maker has three primary uses – utility, governance and automatic recapitalization. As a utility token, MKR is used to pay the fees accrued on CDPs which are used to generate DAI in the maker framework. Only MKR can be utilized towards paying this fee, and once the payment is complete, the coins are burned and removed from the supply. This ensures that there is active control over the supply of MKR.
MKR is used as a basis for acquiring voting rights. MKR holders can vote for business logic and risk management on the Maker system, which is crucial for the system’s success and survival. Maker governance is done through continuous approval voting, which means that every MKR holder can submit a new proposal, vote for an existing proposal, or remove his votes at any time.
Automatic recapitalization refers to forced MKR dilution, which is triggered when mistakes or unforeseen circumstances result in parts of the complete collateral portfolio becoming under-collateralized. The Maker system instantly creates additional MKR tokens to sell them on the open market to raise money for recapitalization, and to bring back the coin from insolvency.
The entire Maker system is based on an assumption that DAI will be accepted by a growing number of participants, and will flourish in the future. In such an event, the owners of MKR will automatically become wealthy and gain the right to use their property towards voting in the community.
Maker coin is one of the leading cryptocurrency concepts in the stablecoin space. In existence, MKR is almost as reliable as DAI. While the future is unclear, MKR has positioned itself as a strong product backed by a reliable team of supporters and users worldwide. The future of Maker coin is probably very bright, and those who invest are expected to receive a generous reward.