DeFi
MakerDAO
A protocol for creating DAI stablecoin by collateralizing crypto assets through decentralized governance.
Last Updated
2026-03-19
Related Concepts
What is MakerDAO?
MakerDAO is a decentralized protocol that lets users mint DAI stablecoin by depositing crypto collateral into vaults. MKR token holders govern risk parameters like collateral types and stability fees.
How does MakerDAO work?
- User deposits crypto (e.g., ETH) into a vault as collateral.
- User mints DAI up to the collateralization limit.
- DAI maintains its
$1peg through economic incentives. - User repays DAI plus a stability fee to unlock collateral.
- If collateral falls below the minimum ratio, the vault is liquidated.
Why does MakerDAO matter?
It provides a decentralized alternative to fiat-backed stablecoins, letting users access liquidity without banks or centralized custodians.
Key features of MakerDAO
- Decentralized, collateral-backed stablecoin
- Over-collateralization required
- MKR governance token
- Automatic liquidations protect the system
Examples of MakerDAO
Deposit 2 ETH as collateral to mint $2000 DAI at a 150% collateralization ratio. MKR holders vote to adjust the stability fee from 2% to 3% to manage DAI supply.