Maker
Maker is a decentralized finance (DeFi) protocol behind the stablecoin DAI, allowing users to generate, borrow, and manage crypto-backed loans without banks or intermediaries.
Table of contents
What Is Maker in Crypto?
Maker refers to the decentralized protocol that powers MakerDAO and its stablecoin DAI. Built on the Ethereum blockchain, Maker allows users to lock up crypto assets as collateral in exchange for generating DAI, a stablecoin designed to maintain a 1:1 value with the US dollar.
This system makes it possible to borrow against crypto holdings without selling them, creating one of the earliest and most influential decentralized lending platforms in DeFi.
How Maker Works
At the heart of the Maker protocol are Vaults (formerly known as CDPs, or Collateralized Debt Positions). Users deposit supported cryptocurrencies (such as ETH or wrapped BTC) into a Vault, and in return, they can mint DAI. To ensure stability, borrowers must maintain overcollateralization, meaning the value of their collateral must always exceed the value of the DAI they generate.
If the collateral drops below the required threshold, the position can be liquidated to protect the system. Stability fees, paid in DAI, are used to maintain the peg and balance supply and demand.
Maker’s Governance
Maker is governed by MakerDAO, a decentralized autonomous organization where holders of the MKR token vote on key decisions such as collateral types, risk parameters, and system upgrades.
MKR holders also act as a backstop, if the system becomes undercollateralized, new MKR can be minted and sold to recapitalize it. This governance model makes Maker one of the most decentralized financial protocols in existence.
Why Maker Matters in Crypto
- Stablecoin innovation: Maker introduced one of the first decentralized stablecoins (DAI).
- Decentralized lending: Enables borrowing without banks, middlemen, or credit checks.
- Risk management: Maintains stability through overcollateralization and community governance.
- DeFi backbone: Many DeFi platforms use DAI as a core trading, lending, and liquidity tool.
FAQ
Is Maker the same as DAI?
No, Maker and DAI are not the same. Maker (MKR) is the governance token of the MakerDAO protocol, while DAI is the decentralized stablecoin it issues and manages, pegged to the U.S. dollar.
What is MKR used for?
MKR is the governance token of MakerDAO. Holders use it to vote on changes to the protocol and help stabilize the system.
Is DAI always worth $1?
DAI is designed to stay close to $1, but its value can fluctuate slightly based on market conditions and collateral supply.
Why is Maker important for DeFi?
Maker and DAI provide a decentralized, stable currency that other DeFi apps rely on, making it a key building block of the ecosystem.
Disclaimer: Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more at: https://go.payb.is/FCA-Info
