With a market cap of well over 20 million US dollars, Ethereum is the second biggest cryptocurrency platform out there. All the above cryptocurrencies are based on the Ethereum platform. Without Ethereum there would be no Maker, neither Dai. This is why we need first to talk about Ethereum.
Created by Vitalik Buterin, a Russian-Canadian programmer, in 2013, Ethereum is now one of the most successful cryptocurrency project, only second to Bitcoin. They thought that bitcoin needed to have programmable blocks through its blockchain. That is why they created a “global, open-source platform for decentralized applications. Some of them are Maker, and Dai.
Maker (MKR) is a cryptocurrency token that lives on the Ethereum platform. Rune Christensen, the founder of MakerDAO, wanted to create a line of decentralized digital assets that will follow the value of real instruments like the US dollar and gold.
The first creation of the Maker Decentralized Autonomous Organisation (MakerDAO) is Dai, which I will cover at a later point in time.
They finance their operations through their Maker (MKR) token. They use this token as public companies use shares. At this point in time Maker has a market capitalization value of $489,901,225, according to coinmarketcap.com.
Dai (DAI) is a stablecoin, meaning that Dai is soft-pegged (closely follows) the value of the US dollar. That means that 1 Dai = 1 US Dollar. As mentioned, this coin is backed by another cryptocurrency, unlike many other similar projects. That means that the sum of the collaterals can be viewed publicly on the Ethereum blockchain.
The generation of Dai uses as collateral an asset that is voted by the Maker holders, anyone of us. This process will make sure that risky assets will stay out of Dai generation and thus the coin will be always soft-pegged to the US dollar. This also solves the price volatility problem that many other cryptocurrencies have.
The creation of Dai is not free. Maker generates Dai by charging fees. These fees are used as the interest rate on Dai savings.
As Cyrus Younessi describes it in his blog post “An Elegant Relationship (DAI, ETH, MKR)”, Ethereum acts as gold, Maker as insurance, and Dai means of payment from a classic finance point of view.