Maker is a Decentralized Autonomous Organization built on top of the Ethereum Blockchain. The focus has been on creating a stablecoin to reduce volatility and to create a coin that the entire community could put faith in to maintain purchasing power. The Dai Stablecoin was born out of this. Maker is leading the way in collateralized debt position (CDP) smart contracts. Anyone with crypto assets can leverage them to decrease volatility and generate Dai, a stablecoin. This ultimately paves the way for the thought process behind derivative trading in the crypto space. You can check out the whitepaper for more info.
CV: Hi Rune, Thanks for taking the time to chat with Cryptovest. Tell us a bit about how you first got involved with MakerDAO?
MakerDAO started as a vision for tackling one of the most necessary aspects of the blockchain: stability. A fully decentralized and stable currency is critical to unlocking the full benefits of the blockchain. We were first called e-Dollar and had the intention of creating a token that would be equivalent to the value of $1 USD. This vision has since evolved and morphed into what is now MakerDAO.
CV: What is MakerDAO currently focused on accomplishing for the remainder of 2018?
We are excited about the launch of multi-collateral Dai. This will increase stability, allowing for expanded use cases for Dai. Right now, you can obtain Dai by using ether as collateral in creating a CDP. We are moving towards expanded options for collateral, which will be determined through the votes of MKR holders.
CV: Where do you see MakerDAO in the next two years?
As we look into the future, we believe there will be strong momentum with the businesses using Dai, especially in supply chain. We also see a huge opportunity with charity and NGOs, where folks who are traditionally unbanked can have access to stable currency. Additionally, we just announced our support for Bifrost, which is a collaboration with ConsenSys Social Impact and Dether to launch a crypto-to-fiat payment system to expedite and reduce the cost of delivering cash to aid groups in conflict areas.
CV: Tell me a bit about the Dai stablecoin? Is it pegged to the US dollar? It seems to be similar to a collateralized – derivative contract?
Dai is an asset-backed, hard currency for the 21st century — the first fully-decentralized stablecoin on Ethereum. It’s managed entirely on the blockchain, through an autonomous system of smart contracts, which are specifically designed to respond to market dynamics to ensure that this essential stability property is continuously maintained. Holders of our stability token, MKR, vote and govern decisions such as expanded collateral options for multi-collateral Dai.
CV: How does the Dai stablecoin maintain its purchasing power with the market fluctuations in cryptocurrency prices - especially with the price of Ether (ETH), as it is used as collateral? How do you correct for over/under collateralization?
Dai incorporates a number of stability mechanisms. Fundamentally, Dai aims to stay soft-pegged to a given “target price”. This is typically achieved by a well-collateralized foundation with CDPs [Collateralized Debt Positions], but is protected by a number of feedback and fallback mechanisms.
Users can lock up Ether (ETH) in a CDP and generate Dai. CDPs hold collateral assets deposited by a user and permit this user to withdraw Dai, but ensures that the user is locking up a significant amount more Ethereum than Dai withdrawn.
While Ethereum is the only collateral currently backing Dai, Maker is expanding into multi-collateral CDPs which will further diversify and insulate Dai from any fluctuations.
In the meantime, 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 Credit System automatically dilutes all of the pooled ETH locked up into CDPs to recapitalize the system. This means that the proportional claim of each PETH [Pooled ETH] goes down. In the event of severely high market instability, there are multiple fallback and feedback mechanisms to maintain stability. First, in the event of a severe market instability, the “Target Rate Feedback Mechanism (TRFM)” can be engaged, breaking the fixed peg of Dai, but maintaining the same denomination. This mechanism offers significant ability for Dai to stay stable even in an extremely volatile crypto market.
In addition, global settlement can be used as a last resort to cryptographically guarantee the Target Price to holders of Dai. This mechanism unwinds the Maker Platform so that both Dai holders and CDP users receive the net value of assets they are entitled to. It’s fully decentralized, and would only be used in serious emergencies, periods of long-term instability, hacking or system upgrades.
CV: Do you think Dai can compete with other stable coins like Tether (USDT) or Digix Gold (DGX)? What differentiates MakerDAO from these competitors?
Unlike other products out there, Dai is a completely decentralized option for stability and fully on-chain. No one can alter the core mechanics of Dai, the collateral is all on-chain; there are no counterparties to trust, and nobody else is the custodian of your funds.
There is no need to trust your exchange, broker, or custodian. You maintain the full control and safety of your funds, similar to holding your own cash in a safe or using a crypto wallet. Dai is a completely fungible ERC20 token that can be stored in any standard Ethereum wallet. It can be freely exchanged with anyone. Dai is also transparent and auditable by anyone.
By using a more transparent system than we see with existing centralized options, Dai holders can properly assess the risk of their backing collateral portfolio when engaging in the Dai stablecoin system. Other stablecoins require centralized counterparties to hold funds. You’re putting the entire faith in their hands. Anything can happen to damage a counterparty. They could get hacked, their funds could get seized, they are vulnerable to theft or fraud.
MakerDao is decentralized, auditable and all on-chain.
CV: What is the most important piece of advice that you would you give someone that is looking to get started in the blockchain and cryptocurrency space?
We have a saying at Maker where “people hired themself into the project.” Essentially, what this means is to just jump in and make yourself useful and helpful. The fastest way to get involved is to join us and start learning.
CV: What are some other blockchain projects that you feel strongly about, outside of MakerDAO?
We are excited to work with other projects that have a shared mission of a better financial future. We recently partnered with Consensys and Dether on Bifrost.
You can check out this video to see more on the partnership.
This article appeared first on Cryptovest
