The Maker Multi-Collateral Dai System (MakerDao)
By Vasilli Kasimov
What is MakerDAO?
MakerDao is the first and one of the major leaders in the decentralised finance (DeFi) blockchain infrastructure, with a total of USD 14.3 Billion locked in the smart contract protocol, currently, according to Defi Pulse[1]. MakerDao was the creator of the first truly decentralised stablecoin called the DAI[2], soft-pegged to the US dollar through a simple — yet effective — financial incentive system, allowing global exposure for individuals to the world’s reserve currency (the US dollar), regardless of location, social status, or political ideology.
How is it disrupting or revolutionising its sector?
MakerDao is a multi-collateral system that allows users to mint a stablecoin, known as DAI[3], (a cryptocurrency pegged to the US dollar), by supplying different cryptocurrencies which have been approved by the MakerDao decentralised autonomous organisation (DAO) as collateral. The MarkerDao protocol allows users to create a Collateralised Debt Position (CDP)[4], in which the user provides an approved cryptocurrency, such as Eth[5], as collateral in order to receive a decentralised loan, whilst eliminating the reliance on a centralised financial intermediary (often called a middleman), effectively eliminating the cost of trust and fees associated with the transaction. Users wishing to pay off their CDP must provide the exact valuation of their DAI initially received. Therefore, the power of this technology is truly highlighted in the fact that users who need fiat but do not want to liquidate their cryptocurrency holdings or positions may provide it as collateral, and upon paying back their loan, they have retained their cryptocurrency, which may have also appreciated in valuation in the meantime.
Is this actor/player country-specific or global?
MakerDao is a global, decentralised financial platform, accessible to all individuals who have access to an internet connection. After establishing an internet connection, a user must have an Ethereum-blockchain compatible cryptocurrency wallet, such as MetaMask, funded with Ether. Users will be able to lend out funds, gain interest and receive decentralised loans, all without relying on a financial institution. The MakerDao protocol provides economic opportunity to various individuals, especially to citizens in countries suffering from a hyperinflated economy, such as Zimbabwe, Venezuela[6] and Argentina[7].