Altcoins Talks - Cryptocurrency Forum
Cryptocurrency Ecosystem => Other Popular Cryptos / Coins => Topic started by: amberrrr789 on September 28, 2022, 05:29:32 PM
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The Maker Protocol or MKR are further names for the Multi-Collateral Dai (MCD) system. On the Ethereum network, MakerDAO was established in 2014 as a Decentralized Autonomous Organization and open-source initiative. Those in charge of it have the MKR token, which is utilized for global governance. Many facets of the Maker Protocol are governed by a process known as Maker Governance, which is organized and managed by the community.
Some Information about the Maker Protocol
It is one of the most well-known decentralized applications (dApps) on the Ethereum blockchain and the first decentralized finance (DeFi) application to be accepted by all countries. Users can create their own money on the protocol. The Maker Collateral Vaults, Dai stablecoin, and Voting are the current components of the Maker Protocol. By employing the voting power of MKR holders to make decisions on important matters like stability fees, collateral types, and more, MakerDAO rules the Maker Protocol. Owners of MKR are in charge of managing the financial risks associated with Dai as well as the stability, openness, and effectiveness of the Protocol. A vote is equal to one MKR token locked in a voting contract.
How does the protocol work?
The Maker Protocol uses Maker Vaults, a type of smart contract, to create new Dai. A number of web applications and interfaces, which effectively serve as network gateways, can be used to establish these contracts. Users must first return the Dai they generated together with a stability charge in order to obtain their collateralized coin via the smart contract.
MKR tokens may also be used by Maker Protocol as a form of governance. Voting suggestions are handled using smart contracts, which can be launched from any Ethereum address. After MKR holders have the opportunity to vote on which proposal they would want to pass, administrative authority to implement the proposed change to the Maker Protocol will be given to the MKR address with the most MKR approval votes.
So what is Dai?
Dai is a stablecoin that is decentralized, collateralized, and pegged to the US dollar. It may sound complicated, but the fundamental idea is that it refers to a cryptocurrency that operates independently from a centralized authority and whose price is roughly correlated to the value of the dollar.
Dai is also unbiased because he is not in a position of power. It is not controlled by a for-profit organization, in contrast to USDT stablecoin. It is collateralized since only Maker Protocol users can issue new Dai by funding a smart contract with the necessary quantity of other cryptocurrencies to support freshly issued DAI. The Dai Savings Rate will determine the interest rate Dai holders can get on their stablecoins through the Maker Protocol (DSR).
Holders of MKR can reduce price volatility when the market price of Dai diverges from the Target Price by voting to adjust the DSR in accordance with market conditions:
- On the market, Dai is more expensive than one USD. MKR vehicle owners may gradually reduce the DSR. Less demand will cause the market price of Dai to become closer to the target price of 1 USD.
- The market price of Dai is below $1 USD. Holders of MKR may choose to gradually raise the DSR. The market price of Dai should rise to the $1 USD target price as a result of increased demand.
Recapitalization: MKR
The MKR token serves as a resource for recapitalizing the Maker Protocol in addition to Maker Governance. If the system's debt exceeds its surplus, a debt auction may be used to raise more MKR tokens in order to recapitalize the system. To reduce danger, MKR holders are urged to work together and carefully regulate the Maker ecosystem.