Maker

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Maker
Maker logo.jpeg
Founded 2014
Key People Rune Christensen, CEO; Andy Milenius, CTO; Steven Becker, President and COO
Products Stablecoin
Twitter @MakerDAO
LinkedIn Profile
Facebook MakerDAOOfficial
Website Maker DAO Homepage

Maker is the nickname for MakerDAO, which is the decentralized autonomous organization smart contract platform that created the DAI stablecoin and the MKR token, which funds MakerDAO and serves as its governance token.[1]

Background

MakerDAO received $27 million in venture capital funding during 2017 and 2018. The first round included eight investors including Andreesen Horowitz.[2] On September 24, 2018, Andreessen Horowitz revealed that it had made a $15 million investment in MakerDAO by having its a16z investment fund purchase 6 percent of the total supply of MKR.[3]

DAI was launched on December 18, 2017, and a year later it had become the 45th most actively traded cryptocurrency according to CoinMarketCap, an industry data reporting service.[4]

Overview

The Maker Foundation created two digital assets - the DAI stablecoin and the Maker (MKR) token - to create a digital ecosystem for cryptocurrency investing and commerce.[5]

MakerDAO's selling proposition for its DAI stablecoin is its supposed transparency. Not only do MKR holders have governance rights that affect the value of DAI, but MakerDAO also publishes its governance and risk meetings on the internet at SoundCloud and its community meetings on YouTube.[6][7]

MKR is a non-mineable ERC-20 token on the Ethereum blockchain issued by MakerDAO that confers governance rights to its holders.[8] At the start of 2019 MKR had the 19th largest capitalization among cryptocurrencies with a value of about $360 million.[9]

Company History

Two venture capital firms, Dragonfly Capital and Paradigm, invested a combined total of $27.5 million in the MakerDAO platform in December 2019, purchasing about 5.5 percent of the total supply of DAI in circulation worldwide.[10]

Coinbase announces custody service; Maker support planned

In March 2019, Coinbase Custody announced through Coinbase's Medium blog that it would begin offering staking services to clients who are institutional traders. The concept of this service is based on the proof of stake model. The first coin that will be used in this service is Tezos (XTZ). This service involves storing Coinbase's clients' assets in cold storage, substantially mitigating the risk of theft. Because of the way this staking service works, only certain cryptocurrencies will be applicable; bitcoin, which uses a governance model based on proof of work, and Ethereum, which is also currently using this model, will not be supported in the near future.[11][12] According to the blog post, support for Maker tokens is planned for the future.[13]

ETH crash causes mass liquidations

On March 12-13, 2020, the price of Ether fell. Although the Maker protocol theoretically adjusts ETH-USD prices based on market prices, the price didn't get updated in time, resulting in many users winning auction with 0 DAI bids. This disrupted the protocol, allowing some to take advantage of the price discrepancies while others found their Vault stakes liquidated.

Between March 19 and March 28, the Maker Foundation held a series of digital token auctions to cover $4.5 million worth of undercapitalized debt created on March 12, when liquidators won collateral liquidation auctions with 0 DAI. The crypto firm Paradigm won 68 percent of the auctions, gaining over 14,000 MKR tokens.

A lawsuit was filed against the Maker Foundation in April, alleging that the Foundation misrepresented the risks of using the protocol to its users.

In September, MKR token holders voted 2 to 1 to not compensate Vault holders who suffered losses due to liquidations caused by the crash. 38 MKR holders participated in the governance vote that led to this decision.[14][15]

Flash crash loan is used to pass a governance vote

In late October, a user on the Maker platform used a flash crash loan - in which - to manipulate a governance vote. A user borrowed synthetic Ether as collateral to buy $7 million worth of MKR tokens; these were used to vote on a minor governance proposal. After the vote, the MKR tokens were returned. This event caused the Maker Foundation to post about the event on Makerdao's forum, highlighting potential flaws in Maker's governance system.[16][17]

References