MakerDAO is a decentralized organization built on the Ethereum blockchain. The main goal of MakerDAO is to manage and control a pair of cryptocurrency tokens: DAI and MKR.
DAI is a stablecoin, which means it’s pegged to a stable asset, in this case, the US dollar. This means that 1 DAI equals approximately 1 USD. This is a key factor in the DeFi (Decentralized Finance) space because it provides a stable medium of exchange, in contrast to other volatile cryptocurrencies.
The value of DAI is kept stable using smart contracts and mechanisms that automatically adjust the total supply of DAI in response to changes in demand. If the demand for DAI goes up (pushing the price up), new DAI is minted. If the demand for DAI goes down (pushing the price down), DAI is taken out of circulation.
MKR is the governance token of MakerDAO. People who hold MKR can vote on proposals for changes to the system. These proposals can cover a wide range of topics, including changes to the risk parameters of the system, changes to the type of collateral accepted, or changes to the system’s upgrade processes.
The MakerDAO system is a complex one with many moving parts, but the overall aim is to create a decentralized stablecoin system that can be used as part of the wider Ethereum DeFi ecosystem.