MakerDAO has become the backbone of DeFi by providing Dai with a decentralized, configurable, and stable store of value.
Over 400 platforms integrated the Dai token and billions of assets lock into the protocol. MakerDAO operates as an MKR governance token. A previous article gave an overview of MakerDAO, and this article provides a more detailed explanation.
MakerDAO is an Ethereum-based protocol that issues a Dai algorithm stablecoin pegged to the US dollar. The Maker Protocol allows you to use Dai in exchange for depositing Ethereum-based tokens as collateral.
The organization was founded in 2015 and was one of the few organizations to abandon ICO funding and focus on sustainable product development. As one of the earliest followers and pioneers of the Ethereum ecosystem, MakerDAO has evolved into the foundation of Decentralized Finance (DeFi).
Today, Dai is available on over 400 platforms, with protocols worth around $2 billion as of October 2020. On the other hand, a centralized institution is in charge of holding and issuing assets issues and manages these stablecoins.
MakerDAO provides a fully decentralized alternative to asset-backed stablecoins. Anyone can use this protocol to repay or borrow Dai, and no one has control over its release.
MKR governance token holders will vote on who will govern the protocol through the Maker DAO DAOs vote on system changes such as fee adjustments and the addition of secured loan types of loans.
Dai is one of the most widely used and liquid cryptocurrencies because it is decentralized and has a stablecoin option.
DeFi’s Dai Capabilities are Multifaceted
To provide services such as peer-to-peer consumer lending, DeFi platforms must have low-volatility assets to trade. Getting a loan in Ether or Bitcoin only means that the cost of the loan can go up with the market and will cause volatility.
Dai with a stable value solves this problem. Similarly, Dai is useful for decentralized exchanges (DEXs) like Uniswap, which are important devices in the DeFi ecosystem. The use of Dex is that it prevents users from trading fiat currencies. It can also cause a huge problem for traders by converting riskier assets into safer ones.
Eliminating fiat trading may also make it difficult for traders to track returns if the underlying trading pair experiences volatility during trading. If you’ve been exploring the DeFi ecosystem, you’ve probably heard of one of the most important characteristics: layout capabilities.
Layout characteristics are design aspects that make it easy to connect and replicate system pieces with other systems. Because MakerDAO is an open-source project that anyone can easily read, copy, and build code, it is easy to write and also provides a detailed developer guide.
In this way, DeFi developers can easily integrate Dai into their applications and leverage their vast user base while relying on the MakerDAO protocol infrastructure.
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