MKR is the “governance token” for MakerDAO. It is used to participate in decision-making on the platform, where the holder has the opportunity to vote on various proposals and decisions that affect the development and operation of the Maker protocol. Thus, MKR holders have a direct impact on how the platform functions. When users repay their loans to retrieve the collateral utilized for the loan, MKR is also used to pay so-called stability fees. This helps maintain the stability and security of Dai. MKR tokens can also be burned (destroyed) as part of the stability fees, which reduces the supply and can positively affect its value.
Maker operates through a system of Collateralized Debt Positions (CDPs), where users lock in their cryptocurrency assets as collateral to create Dai. The value of the collateral must exceed the value of the Dai created to ensure the system remains stable. If the value of the collateral falls below a certain level, the position is automatically liquidated to protect the system and ensure Dai remains stable. Stability fees are paid in MKR, and these fees are used to buy back and burn MKR, contributing to the long-term stability of the Maker ecosystem.
Why does Maker exist?
Maker exists to create a stable and decentralized financial platform that offers a stablecoin known as Dai. Dai is pegged to the value of the US dollar, making it less volatile and more useful for trading, saving, and transfers compared to many other cryptocurrencies. MakerDAO enables a decentralized financial system where users can create and manage Dai without relying on centralized institutions. By using collateral deposits and smart contracts, Maker offers a reliable and transparent solution for creating a stable cryptocurrency that can be used in a variety of DeFi applications.
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Maker's Website: https://makerdao.com/en/
Maker's white paper: https://makerdao.com/en/whitepaper/
Maker's Wikipedia: https://en.wikipedia.org/wiki/Dai_(cryptocurrency)