MakerDAO (Maker) is a pioneering decentralized finance (DeFi) project that addresses the volatility and centralization concerns associated with stablecoins. Unlike traditional stablecoins that are issued by centralized organizations and often lack transparency, MakerDAO generates its stablecoin, DAI, through a decentralized system backed by collateralized crypto assets.
At its core, Maker operates as a community-based lending platform, where users can leverage their crypto assets as collateral to obtain DAI, the stablecoin pegged to the value of USD. This innovative approach allows borrowers to access funds without relying on traditional banks and their cumbersome processes. Instead, they interact with a lending pool represented by Maker's community members, who are willing to provide loans in exchange for holding the borrower's crypto collateral until the loan is repaid.
To ensure the stability of DAI's value at $1 USD, Maker employs its governance token, MKR. In case of a significant risk to the system, such as a breach or decline in collateral value, MKR holders are responsible for governing the platform and taking necessary actions to maintain DAI's peg. Show Less
