MakerDAO
The decentralized autonomous organization behind the DAI stablecoin, which announced a rebrand to Sky in August 2024 and launched the Sky ecosystem in September 2024.
MakerDAO is a decentralized autonomous organization (DAO) that maintains and regulates the DAI stablecoin on the Ethereum blockchain. It was formed in 2014 by Danish entrepreneur Rune Christensen. In August 2024, MakerDAO announced a rebranding to Sky, with the new ecosystem launching the following month.
Quick Facts
- Protocol type
- Decentralized Autonomous Organization (DAO)
- Native token
- MKR
- Stablecoin issued
- DAI
- Underlying blockchain
- Ethereum
- Core mechanism
- Over-collateralization via Smart Contracts
Lore & Background
MakerDAO was formed in 2014 by Rune Christensen. The name is based on a Chinese character Christensen translated as 'to lend or to provide capital for a loan.' MakerDAO was one of the earliest decentralized finance apps. In September 2018, Andreessen Horowitz invested $15 million by purchasing 6% of MKR tokens. In 2018, MakerDAO formed the Maker Foundation, run from Copenhagen. In 2019, an internal struggle over integrating with traditional finance led to the departure of MakerDAO's CTO. In August 2024, MakerDAO announced its rebranding to Sky, which officially launched in September 2024. The Sky ecosystem introduced a new stablecoin, USDS, alongside the existing DAI.
Reader's Guide
DAI is created and destroyed through overcollateralized loans via MakerDAO's smart contracts. Users deposit collateral (e.g., Ether) to mint DAI as a loan. The collateralization ratio is the USD value of collateral divided by DAI borrowed. Each loan type has a minimum collateralization ratio (usually 110–200%). If the ratio falls below the minimum, anyone can trigger a sale of collateral to repay the debt. Upon repayment, DAI is destroyed and collateral released. MKR token holders can propose and vote on system parameters. Interest from loans is used to buy and burn MKR tokens, making MKR deflationary.
Did You Know?
- MakerDAO was formed in 2014, not 2017.
- In March 2020, DAI traded up to $1.11 during a deflationary deleveraging spiral before returning to $1.00.
Frequently Asked Questions
What is MakerDAO?
MakerDAO is a decentralized autonomous organization on the Ethereum blockchain that manages DAI, a leading stablecoin pegged to the US Dollar. It operates without central control, relying instead on smart contracts and community governance to maintain its functions.
How does MakerDAO keep DAI stable?
The protocol maintains stability by requiring users to lock up crypto assets in over-collateralized Vaults before generating DAI. This ensures that the value of locked collateral always exceeds the amount of stablecoin issued, protecting against market volatility.
What is the role of the MKR token?
MKR serves as the governance token for MakerDAO, allowing holders to vote on critical protocol parameters and risk management decisions. It also acts as a loss-absorbing mechanism that can be minted or burned to stabilize the system during financial stress.
Is MakerDAO controlled by a single entity?
No, the protocol is entirely decentralized and operates based on code executed on the Ethereum blockchain. Decision-making power rests with the global community of MKR token holders who vote to steer the system's evolution.
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