I recently came across the Maker token because of a donation made by Vitalik, co-founder of Ethereum. In his donation, he transferred 100 ETH and 100 MKR to a fund setup to help with the COVID-19 situation in India. I think it's amazing that we have the ability to transfer vast amounts of wealth simply (and quickly) by the click of a button.
I've been trying to understand more of what Maker (MKR) is and why it is so important. There's a lot of jargon tossed around and it can sound very confusing when you start hearing about governance, burning and collaterals. I think Coinbase does the best job in summarizing what Maker is and can be through a series of three short videos.
The token itself is very nascent (only a few years old). But I think it has a lot of room to grow as more users from all over the world, especially for users living in developing countries or countries with high inflation, begin to use the token.
My simple takeaway is that Maker allows users to:
- Put up cryptocurrencies as collateral and receive DAI, which is pegged 1:1 to the USD, in return
- Repay the loan in DAI after a period of time
- Once repaid, the DAI is "burned" or removed from the system
- MKR creates DAI to ensure the 1:1 peg is maintained; or in some cases, MKR is burned to maintain the peg
The above is my understanding from watching a few learning videos, and I welcome any comments if I misunderstand or misstated anything. I am certain MKR today will look nothing like MKR in 5 years, and that is why I am excited about it. Holders of MKR can vote on its future as part of its governance protocol.