What is MakerDAO?
MakerDAO is the organization behind the Dai stablecoin. Dai is estimated at 1 USD, practically like Tether and like Tether, it is unmineable as well. However, that is where the differentiation closes. Dai is a crypto-collateralized rather Tether. There are numerous things that one needs to experience to get their heads folded over how Dai functions.
The story of Two Tokens
Before we get into how Dai functions, we have to know about the tokens. This Platform has two coins: Makercoin (MKR) and (DAI).
- Makercoin (MKR): MKR token is not a stablecoin. The main reason is to govern the Maker Platform.
- (DAI): The stablecoin that is acceptable for payments, collateral, and savings.
A Fee Hike is expected for DAI Stablecoin, but MakerDAO Is Holding a Vote First
MakerDAO is the home of the DAI stablecoin, which is funded by Ethereum. Moreover, the present structure of the coin has prompted a few concerns from the developers during their call on the 28th of February. It was recommended that the peg for the stablecoin might need to accompany an increase in price, because of issues with liquidity if it needs to keep holding its value.
The Founder of MakerDAO, Rune Christensen, was one of the many individuals at the meeting to voice their concerns, saying that the peg, the stablecoin as to the dollar has nearly achieved its “limit.” The absence of natural interest is harming, and it could see a drop in the cost, which would take it to the path to a “dangerous criticism loop.”However, with an attempt to include the whole network in this way, Christensen chose to start a poll survey to help decide if increasing charges and raising the debt ceiling on the stablecoin framework would be useful.
The poll survey, which is being known as the Dai Stability Fee poll, was conducted on Monday, and any client with MKR governance tokens is qualified to vote. The fee would expand from the current 1.5% to 3.5%. Although the coin has appeared at a predictable 98 cents for January, the value of the stablecoin has leaped between 98 cents and $1.02 in worldwide markets. While this may seem to be a small sum, the difference can add up rapidly.
In a vote a month ago, the same MKR holders were encouraged to vote on increasing the charge twice by 0.5%. In any case, in a post from the organization, the developer lead says that the expansion would be “negligible,” including that the increase in fee would go on until the difference between the peg and the stablecoin is amended.
Moreover, the expansion of the fee isn’t just about MakerDAO itself. The stablecoin is utilized in several applications that depend on the consistency of the value and the charge, as Gitcoin, which regularly pays out their bounties in DAI coins. The Connext Network, a payment channel platform that will launch their mainnet on Ethereum, utilizes DAI as their primary exchange medium.
Currently, MakerDAO smart contracts represent 2 million ether tokens, which is about 2% of the total ether produced. Moreover, the adoption of this asset is progressively similar to a “collateralized debt position,” which implies that the dollar-pegged DAI requires multiple times the ether for withdrawal. At that point, since the token is a stablecoin, the user can liquidate holdings for the payment of bills, mainly utilizing it as loans, which is a developing demand.
An issue emerges with a DAI CDP because the ETH cost can drop. If the price value tanks beneath 150%, it is liquidated, and there is a danger of losing a portion of the collateral that they held the DAI coin for, which is the more concerning issue.
The main people or entities permitted to vote on the expansion or expulsion of data sources are the ones with MKR tokens. This factor is progressively important as the holders of DAI debate whether the debt ceiling should have to be raised. If the market drops, liquidation of ether may become necessary. However, Christensen has been resolved, this is just a most worst-case outcome imaginable. Taking into account that only 10% of MKR token holders took part in the last vote, it is questionable how many would vote this time.