What is Maker and Why is it a Top Coin?
Maker (MKR) and its stable coin DAI have been in the works since 2015, but they have really shinned during the 2018 bear market. MKR and DAI have been added to Coinbase, and MKR is now a top coin by market cap in 2019.
Not only is MKR top 20, but it is an oddity in that bunch, because its volume is only a tiny fraction of the other coins in the top 20 are.
So what is going on here?
The gist of what is going on is that Maker did more than a few things right.
How Maker/DAI Works and Semantics: MakerDAO is a DAO (a decentralized autonomous organization), Maker (MKR) is a token that gives voting rights and fluctuates in value, and DAI is the stable coin created using Maker’s lending system. The website is https://makerdao.com, check it out.
Here is the list of some of what Maker did right:
- MKR has a very small supply. There is only 1 million total supply give or take depending on the amount burned at a given time. Meanwhile, the circulating supply is even smaller. This means order books tend to be thin. Thin order books plus more demand than supply on exchanges means the price is easily pushed up on exchanges.
- Maker didn’t have a public ICO, they tactically sold MKR and DAI to specific entities within the crypto and finance community. So Vitalik and Andreessen Horowitz’s a16z have MKR and DAI, but you probably don’t unless you were deep into crypto these past few years and accumulated on their public DEX. In short, they distributed to people who have no reason to sell and who aren’t traders, and it has been hard to access for most of its lifetime because it was never pushed onto public exchanges. In shorter, they avoided much of the sell pressure of the bear market by keeping Maker out of easy reach of the public.
- Maker’s borrowing system is very popular. Maker’s borrowing system (accessed via its CDP portal) lets you lock up ETH as collateral and borrow DAI, DAI can then be used to buy more crypto. In practice this means people can essentially leverage their ETH to buy more ETH using a Collateralized Debt Position or CDP (among other things). Over 2% of all ETH is locked in CDPs. TIP: DAI is created from ETH being locked in CDPs. TIP: Maker plans to allow other asset types to be collateralized, as long as it is in the form of an ERC20, it’ll be able to be collateralized in the future (so wrapped Bitcoin and Security tokens for example).
- DAI is one of the main stable coin used on Decentralized Exchanges (DEXs), it is probably the only modern example of a decentralized stable coin being successful. Now it is even listed on Coinbase.
- Holding MRK means having voting rights in the Maker system. This creates demand for MKR.
So in short we have a successful stable coin attached to a successful lending system that lets people leverage their ETH, while ETH is at (according to ETHUSDLONGS here in late March 2019) a great point to leverage long. We have Vitalik, Andreessen Horowitz, and Coinbase on board. We have a limited supply, and we have only a small fraction of circulating supply actually on exchanges. We have a popular Ethereum-based company who didn’t have an ICO and is thus safe from the SEC (logically). And, to top it off, we have a limited amount of exchanges to trade MKR on (while DAI flows around freely).
Add that up, and you get the result of a steady increase in prices.
That means the best MKR prices are long gone, but the reason to be part of MKR is stronger than ever.
Learn more about Maker/Dai.
When considering valuation, consider MKR, Dai, and ETH (or other collateral) in CDPs. If you consider MKR and Dai total volume, and consider the amount of ETH locked in CDPs, the market cap for MKR starts to make more sense why MKR is in the top 20 by market cap.
How Do I Get MKR? Is Maker on Coinbase? Maker is only on Coinbase in some countries, we don’t have it in the US yet. Try KuCoin if you are inclined to hunt some down.
Is Maker Decentralized: Like almost every crypto in practice, but not literally like every crypto, Maker is only quasi-decentralized. Ultimately a group of people created Maker, manage Maker, distributed Maker, and can still distribute Maker. That said, holders of Maker do vote on changes and the organization that runs Maker is a DAO.
"Ethereum-based MKR and DAI are Rising Stars of Crypto" contains information about the following Cryptocurrencies: