Maker is a cryptocurrency platform built on the Ethereum blockchain which issues DAI tokens (a stablecoin) which aims to minimize the negative effects of volatility. Developed in 2015, Maker’s MKR tokens were the first ever tradeable tokens on the Ethereum network.
MKR and DAI Relationship
The Maker Coin (or Maker Token) is an investment into the Maker Project, which lets investors participate in the maintenance of the Maker projects. Unlike the DAI stablecoin which is pegged to the dollar’s value, the MKR is a utility and governance token.
Its purpose is to stabilize the value of DAI through smart contracts which are named Collateralized Debt Positions (CDP). When the execution of a smart contract is completed, the MKR token no longer exists.
The coin can be sent and received by any Ethereum account, or any smart contract that is set to use the MKR transfer function.
Being a stablecoin implies that DAI is not susceptible to huge price fluctuations. Essentially, the MKR token is used to keep the DAI stable against the dollar. It also gives users control over the system and to ensure a higher degree of transparency. Users are also able to vote to contribute to the development of the system.
When a user ends a CDP by destroying an amount of DAI equal to the sum they generated using it, they are required to pay a small interest fee in MKR. This lead to the MKR coin to be destroyed, which reduces the supply of MKR and increasing its price.
As DAI demand increases, users are incentivized to create CDPs and eventually close them to gain back their collateral. As DAI gains more popularity, more MKR will be destroyed as interest fees, driving up the price of MKR.
Can MKR be Mined?
MKR is an ERC-20 token issued by the Ethereum blockchain and cannot be mined. The coins can be created and destroyed based on the DAI price fluctuations so it can maintain its constant value of $1 USD.
MKR holders have the right to vote within Maker’s continuous approval voting system. Bad governance leads to the devaluation of MKR tokens, which in turn keeps holders motivated to vote in the best interest of the entire system.
DAI’s value is rarely $1, being typically set in between $0.98 and $1.02. Instead of mining. DAI is issued by purchasing a CDP, and MKR act as a sort of loan. Upon paying off the loan (along with MKR fees), the DAI is destroyed as the smart contract is completed.
To buy the DAI stablecoin, you must convert your ETH to wrapped Ethereum (W-ETH). This is how decentralized exchanges such as 0x allow the exchange between ETH and tokens on the Ethereum blockchain.
The conversions between MKR, DAI, and ETH are made possible through the use of Oasis Direct, MakerDAO’s decentralized token exchange platform which can be used with other ERC20 tokens on the Ethereum blockchain.
Where Can You Store MKR?
Both DAI and MKR can be stored in any wallet that is compatible with ERC-20.
Maker (MKR) Price Analysis
When Maker (MKR) almost reached the $1700 mark in January, mirroring the growing trend that was prevalent at that time in the crypto market. Naturally, the price corrected itself by early February, going down to $821. The coin oscillated, in some months going even below $500 at some point and above $1100 at another.
However, in recent weeks, MKR seems to have stabilized itself, remaining between $750 and $1100. The MKR coin is currently trading at $740.83 USD. It is currently ranked as the 22nd crypto on CoinMarketCap, having a market capitalization of $539,489,542 USD, with a circulating supply of 728,228 MKR out of a total supply of 1,000,000 MKR.
Where Can You Buy MKR?
MKR is currently available on 14 exchanges, including Ethfinex, Gate.io, HitBTC, IDEX, OasisDEX, and OKEx. The bulk of the trading volume is on OKEx and OasisDEX. The token can be traded against BTC, ETH, DAI and USDT.
Maker Coin is an interesting concept, as it facilitates the stability of a cryptocurrency, aiming to combat the market’s notorious volatility. Nothing certain can be said about its future for now, and more explanations are needed as the entire system is rather complicated.