MakerDAO is a decentralized global reserve bank that operates on the . It is an open-source project and a that was established in 2014. The Maker protocol leverages Ethereum to provide a range of functionalities, including the collateralization and lending of its , called , as well as governance. The Maker protocol automates these processes, allowing for a more secure and transparent financial system. [15][16]


The Maker Protocol operates by enabling individuals to obtain loans in using various as collateral. Importantly, these loans are overcollateralized, requiring the deposit of a greater amount of cryptocurrency than the loan amount. [17]

The need for overcollateralization is to safeguard against potential market crashes of ETH or the underlying coins supporting DAI, such as (WBTC) and centralized U.S. dollar stablecoins and USDP. [17]

The Maker Protocol

The Maker Protocol, or Multi-Collateral Dai (MCD) system, enables users to generate DAI by pledging collateral assets approved by the Maker Governance. This governance is a community-run and -operated process responsible for overseeing various aspects of the Maker Protocol. [16]

The Maker Protocol creates new DAI through smart contracts referred to as Maker Vaults. These smart contracts can be accessed through various web interfaces and applications, such as Oasis Borrow and Instadapp. To retrieve their collateralized cryptocurrency from the smart contract, users must repay the Dai they generated, along with a stability fee. [18]

External Agents

The operations of the Maker Protocol rely on some external agents. [23]

  • Keepers: a Keeper is an autonomous entity that provides liquidity and receives incentives through arbitrage opportunities.
  • Price Oracles: the protocol utilizes a decentralized oracle infrastructure to acquire up-to-date information on market prices of collateral assets held in Maker Vaults. Price oracles are essential in identifying the appropriate timing for initiating liquidation.
  • Emergency Oracles: they act as a final line of defense against any attempts to attack the platform's governance or other oracles.
  • DAO Teams: DAO teams are groups of individuals and service providers who ensure the proper functioning of governance-related tasks


The Maker Protocol is governed by the MKR token. Proposals for changes take the form of smart contracts and can be submitted by any Ethereum address. The MKR holder community then votes on the proposals and the Ethereum address with the most MKR approval votes is granted the power to implement the proposed changes to the Maker Protocol. [18]

One formal vote in the Maker platform is equivalent to owning one MKR token. The more MKR tokens a person holds, the greater their ability to influence decision-making within the platform. The Maker governance model includes an Emergency Shutdown procedure, which can be activated by any individual possessing at least 50,000 MKR tokens in the event of a suspected or impending takeover. The threshold of 50,000 MKR tokens represents roughly 5% of the total token supply, meaning that even smaller players on the platform can trigger the shutdown. The governance mechanisms used by Maker include a combination of on-chain and off-chain methods. [24]

Off-chain Governance

Maker's off-chain governance relies on its online resources, which include the Maker DAO discussion forum and the Maker chat app. These channels allow any individual to propose and discuss ideas, specially at the forum. Ideas that achieve sufficient preliminary consensus through these channels may proceed to on-chain consideration. [24]

On-chain Governance

Maker utilizes two primary on-chain governance mechanisms: Governance Polls and Executive Votes. [24]

Governance Polls are conducted on a continuous weekly basis to measure the attitudes of MKR holders towards various topics, including those that have been extensively discussed off-chain and are being considered for further decision-making. The poll results, however, do not impact the protocol's state. [24]

Executive Votes are formal on-chain votes among the MKR holders to decide on changes to the protocol. They can be introduced at any time by any platform stakeholder, but only MKR holders have the voting rights during an Executive Vote. While Executive Votes may be based on results from Governance Polls, they are not required to be. Maker has established an informal culture of orderly pipeline discussions from off-chain discussions to Governance Polls to Executive Votes. [24]


MKR Token

MakerDAO was launched with a total supply of 1 million MKR tokens. The total supply and value of Maker tokens are subject to change based on market conditions and prices. [18]


In the event of a sudden drop in price of cryptocurrencies stored in a Maker Vault smart contract, they may no longer have sufficient value to support the generated , resulting in a liquidation. If the DAI obtained through auctions is insufficient to fulfill the vault's obligations, new MKR tokens will be minted. Conversely, if more DAI is generated than required, it is used to purchase and burn Maker tokens, altering the total supply of MKR and affecting its price, while DAI remains pegged at $1 USD. [18]

The MKR token enables its holders to vote on changes to the protocol. Approved modifications to the protocol's governance variables may not take effect immediately and can be delayed for up to 24 hours if the Governance Security Module (GSM) is activated. This delay provides MKR holders with the ability to trigger a Shutdown and protect the system against harmful governance proposals, such as those that alter collateral parameters or disable security measures. [16]

DAI Token

is an algorithmic designed to maintain a one-to-one ratio with the US dollar. Its main purpose is to facilitate lending and borrowing of cryptocurrency assets without requiring a middleman. Users can generate and borrow DAI by opening a collateral vault through MakerDAO's Oasis Borrow dashboard and providing Ethereum-based assets as collateral. The deposited collateral must always have a higher value than the issued DAI tokens. In case the value of the collateral drops below the value of the DAI tokens issued, the collateral will be liquidated. [25]

Maker Vaults

Accepted collateral assets can be used to generate DAI via called Maker Vaults in the Maker Protocol. Users can access the Maker Protocol and establish Vaults through several user interfaces such as Oasis Borrow and those created by the community. Generating DAI results in an obligation to repay the DAI along with a Stability Fee to unlock the collateral placed and secured in a Vault. [26]

Vaults are non-custodial by nature. Users directly interact with the Maker Protocol and Vaults, and they have full control over their deposited collateral as long as the collateral's value remains above the required minimum level. [26]


During the MakerDAO Secondary Token Sale, the company raised funds from various investors. On December 16, 2017, a sum of $12 million was raised with investment from Andreessen Horowitz, Polychain Capital, and other firms such as Distributed Capital Partners, Scanate, FBG Capital, Wyre Capital, Walden Bridge Capital, and 1confirmation, at an average price of $300 per token. In April 2019, another sale took place, raising $15 million with a16z Crypto as the lead investor and an average price of $250 per token. In the same month, MakerDAO raised an additional $27.5 million with investment from Paradigm and Dragonfly Capital. [20]

Maker Foundation

The Maker Foundation, part of the worldwide Maker community, collaborates with various partners to build and launch the Maker Protocol. The Foundation is now working with the MakerDAO community to establish decentralized governance and strive for full decentralization of the Maker Protocol and Dai, a decentralized, collateral-backed stablecoin on the Ethereum blockchain that is governed by MakerDAO. [16][19]


The MakerDAO Team is composed of: [21]

  • Rune Christensen – Founder
  • Derek Flossman – Head of Protocol Engineering
  • Phil Inje Chang – Product Leader
  • Andrew Chorlian – Blockchain Developer
  • Michael Elliot – Blockchain Engineer
  • Krzysztof Kaczor – Senior Software Engineer
  • Matthew C. – Business Development Man

Sustainability Efforts

MakerDAO has proposed a governance constitution that includes funding sustainability campaigns with 20,000 MKR tokens (approx. $14 million) until 2040. The constitution, written by founder Rune Christensen, prioritizes "scientific sustainability" as a core principle in Maker's politics and operations. [22]

“At the time of the Maker Constitution the world is headed off a cliff with runaway greenhouse gas pollution pushing the biosphere past critical climate tipping points that will cause disasters for centuries to come. Immediate action is required" -preliminary draft of the Maker constitution

The draft MakerDAO governance constitution is still in progress and will be continuously updated. The proposal needs to pass through the Request for Comments (RFC) phase, where the community is currently reviewing and providing feedback. The RFC phase lasts at least 4 months, after which Christensen can submit the proposal to the governance cycle for evaluation and voting by the community. [22]

MakerDAO x Chainlink

MakerDAO onboarded smart contract automation into its Keeper system. Chainlink Automation executes functions such as updating prices, balancing liquidity for the DAI Direct Deposit Module (D3M), and increasing the debt ceiling for collateral assets. [27]

“This network of automated bots perform essential tasks to maintain the Maker protocol and will be greatly expanded through the integration with Chainlink’s renowned, hyper-reliable automation platform” - Nadia Álvarez, member of MakerDAO’s Growth Core Unit

MakerDAO x Spark Protocol

MakerDAO released a lending platform and liquidity market called Spark Protocol, a fork of version 3. Spark Protocol is an application interface designed to enable users to borrow, lend, and stake DAI. To enhance security in the case of a possible exploit or outage, pricing oracles, which are sources of data, provided by Chronicle Labs and Chainlink, will support the new protocol. [28][29]

Spark Lend is the primary product offering of the platform. It enables users to borrow at the existing DAI Savings Rate of 1%. Spark Lend will accept decentralized assets with high liquidity, including ETH, DAI, wstETH (wrapped derivative of staked ETH), and wBTC (wrapped BTC), as collateral. The platform is expected to introduce additional features, including fixed-term yield products and the integration of Maker's synthetic liquid staking derivative, EtherDAI, in the future. [28][29]

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