Hello all! This is Cryptoshibe from the Fat Pig Signals team and today I will be talking about Maker, one of the oldest Ethereum-based projects. This review is not sponsored, and you should be aware that investing in cryptocurrencies are of high risk and this review is not financial advice. The Maker ecosystem acts similar to a central bank, but it is a decentralized application running on the Ethereum blockchain. The system consists of the Dai stablecoin, a collateral loaning platform Maker CDP, and a decentralized governance platform.
Bitcoin: A Peer-to-Peer Cash System
Bitcoin takes advantage of the prehistoric concept of commodity money, attracting investors through its underlying usefulness and its limited supply, to give it value. Though, for the majority of human history, commodity money has never dominated as a cash system. The creation of Ethereum allowed less restrictiveness to Bitcoin language, therefore opening up vast possibilities for developers to write their own programs, and allowed the team behind Marker to explore new cash systems. Introducing Dai, Ethereum’s peer-to-peer cash system, which is based on the notion of mutual credit. The cash system is based on the concept of “Thanks, I owe you one.” The introduction of money to humanity transformed this notion to a quantitative measure. “Thanks, I owe you one” becomes “Thanks, I owe you ten bucks.”
Dai: Ethereum's Peer-to-Peer Cash System
The Dai Credit System bridges the gap between credit systems and cryptocurrencies. Digital assets like Ethereum and Reputation are secured in a smart contract and the debt against these assets are generated to Dai. This generation of Dai can never be more than the value of the collateral, and when one secures their assets they are taking a Collateralized Debt Position, or CDP. This system is responsible for the stability of Dai, as the 1 DAI = 1 USD soft peg is used to calculate the collateral-to-debt ratio, if there is a sudden market crash in ETH, and a CDP ends up containing more debt than the value of its collateral, the Maker Platform automatically dilutes the ETH to recapitalize the system. Say you buy a $200,000 house, the bank would offer a significant amount for you to do it, with the difference made up by the down payment. This is the same for how Maker CDP works, although the ratio would be different due to the risk and volatility of cryptocurrencies. Who decided to reduce this ratio? MKR holders.
MKR Holders: Everyone Can Be a Central Banker
MKR is the administrative token of the Maker system. The holders of MKR consist a decentralized regulatory community that makes the decisions of the nature of risk in the marketplace. They come to consensus of which tokens can be used as a collateral, what the ratio that can be issued against those assets, and what amount of fees that are based on how long it was outstanding for. This fee is transferred to the aggregate value of MKR as a reward for their services, and when the holders make a miscalculation of the risk, the aggregate value of MKR is used to protect the integrity of Dai. It protects the integrity of Dai and protects its stability and usefulness of the cash system. Holders of MKR thus are comparable to central bankers.
Adoption: The Center of All Ethereum Dapps
Partners with Tradeshift and Wyre drive the adoption of Maker in both businesses and individuals, and it is symbiotic with the entire Ethereum dapp ecosystem. Maker needs other dapps to create wealth and useful crypto assets to use as the base of Maker’s monetary supply, dapps need Maker to coordinate a useful cash system for the Ethereum blockchain. The rapidly increasing amount of dapps that are coming out cannot be possible without Dai being a useful means of exchange. This comes to show how important the Maker cash system is to the Ethereum ecosystem, as the ecosystem revolves around it, providing utility to new innovations.
Conclusion: A Better Cash System, Decentralized
And this is the reason why I personally believe Maker is one of the most important tokens to have ever been created on the Ethereum blockchain and why I believe the Maker cash system is such an important infrastructure for the entire cryptocurrency space. For this reason, I give the Maker project an A+. Both MKR and DAI are tradable on almost all decentralized exchanges on Ethereum, such as Kyber Network, Bancor, 0x, AirSwap, and most importantly on Ethfinex Trustless, where MKR is most liquid on. I believe this is a very fundamentally strong project. Personally, I feel like this is the strongest coin we have to go against big, centralized banks.
Sources
MakerDAO: A New Hope for Financial Reform by Andy Milenius (Devcon 4) - Ethereum Foundation
https://www.youtube.com/watch?v=2lxc7qCsvF8&feature=youtu.be
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