MakerDAO is an Ethereum-based protocol that enables collateralized borrowing without relying on an intermediary. Since it went live, it has been widely adopted, and its DeFi presence has helped position MakerDAO among the most active protocols in the crypto space.

MakerDAO relies on smart contract functionality to handle borrowing and lending. It uses two tokens-DAI and MKR-to help manage the pricing and stability of loans.

What are MakerDAO’s key features and how does it work?

MakerDAO operates with two tokens: MKR and DAI. DAI is intended as a fully backed stable asset, while MKR serves as a governance token. 

DAI is an ERC20 token on the Ethereum blockchain and is designed to be softly pegged to the US dollar. It’s also available on other chains now, aiming to offer an alternative to more volatile cryptocurrencies. When someone opens a loan through MakerDAO, new DAI is generated-this is the token users borrow and later return.

The Maker (MKR) token is issued by MakerDAO itself. Its primary role is to govern the Maker protocol. In contrast, many conventional stablecoins depend on fiat reserves-or sometimes gold-to keep a crypto asset pegged and steady.

MKR also plays a part in Dai system governance. Token holders use MKR to vote on proposed updates to the MakerDAO protocol. Even so, any user with an Ethereum address can submit a change proposal, regardless of whether they hold MKR.

DAI is produced when a buyer purchases a smart contract-based collateralized debt position (CDP), which functions similarly to a standard loan product. Buyers provide ETH, and in return they receive DAI-so ETH serves as the collateral supporting the loan. 

Overall, the setup lets people borrow against their ETH. When the loan is repaid, the DAI is “burned” or permanently removed from circulation.

Where can you buy MKR?

MKR can be purchased on these exchanges: