MakerDAO: the temptation of traditional finance

👉 First of all, what is MakerDAO?

MakerDAO is the decentralised autonomous organisation (DAO) that manages DAI, the fourth largest dollar stablecoin on the market ($5 billion capitalisation). The protocol was launched in 2018 on the Ethereum blockchain.

Unlike centralised stablecoins such as USDT ($65 billion) and USDC ($63 billion), DAI is not based on a traditional dollar reserve.

Its value is "backed", i.e. supported, by crypto-assets, which is not without consequences: to ensure the stability of the reserve, an over-allocation mechanism is needed in case crypto-asset prices fall.

An example: you need to send $1,000 worth of ethers to generate 500 DAI. In the event that ether falls by around 50%, the collateral is liquidated on the markets, but the DAI remains stable. Pretty clever 🤓.