In the cryptocurrency world, there are so many alt coins that it is simply impossible to invest in them all. This means you need to pick and choose your investments carefully. Especially when it comes to alt coins because many of them can actually be scams rather than legit investments.
MakerDAO is a cryptocurrency and smart contract platform that works alongside several other blockchain technologies in order to create a decentralized ecosystem of next level financial technology allowing users to access the numerous financial products in the cryptocurrency world.
Although Maker was one of the first in its space, this doesn’t mean that it is always the best idea to invest in it. Keep reading to find out more about Maker, the technology backing it, and whether or not it will be a good addition to your portfolio.
What is Maker?
Maker is a portion of the MakerDAO platform built on Ethereum, which is a dapp designed to run different types of smart contracts for the DEFI cryptocurrency space. Maker is the utility coin used on the platform, which is used in conjunction with the platforms stable coin DAI, to issue loans and other DEFI products to users.
The cool thing about MakerDAO, is that you can use the platform to loan cryptocurrency to yourself. You do this by placing ETH in a compatible wallet like metamask, then opening a smart contract on the MakerDAO platform. This process creates the DAI stablecoin, which is pegged to USD on a 1:1 basis. So if you want to borrow the equivalent of $1700 from MakerDAO, you would put the Ethereum equivalent into the smart contract which will issue you 1700 DAI. And then when you are ready to repay your loan, you will pay 1700 DAI back plus some interest to be able to unlock your ETH. This DAI can then be exchanged for other cryptocurrencies as well as USD on any exchange that you choose.
What this app does is actually revolutionary, as one of the problems with financial products in the DEFI world is taking out a loan using cryptocurrency as collateral, then watching as your cryptocurrency fluctuates in price to the point where you could end up owing twice the amount that you put in. And if your DAI becomes worth more than your Ethereum, this could cause you not to want to pay back the loan (and honestly, who would at that point?) DAI solves this problem, as it will only fluctuate as the US dollar does, rather than when Ethereum does. This can save those using the loans from the volatile price fluctuations of the cryptocurrency market.
Of course there are still controls in place, and if Ethereum begins to drop too much in price, then the smart contract on the platform will execute, liquidating your loan to pay your debt. This is an automatic process and it can’t be stopped. It was programed into the MakerDAO code as a safeguard to ensure that people don’t borrow more cryptocurrency than they will be able to pay back. And this is where Maker comes in. When the liquidation process above executes, Maker is created and sold to investors. This gives the system liquidity, paying off system debt, while the prices of ETH are low, and when they rise back up, Maker will be repurchased and then burned for a higher price—rewarding those who invested in the dapp when ETH was low in value.
Who Invented MakerDAO?
Surprisingly, MakerDAO has been around almost as long as Ethereum. The idea was thought up by Rune Christensen in 2015, and the platform was released in 2017. Christensen has remained closely involved in the project and is still the current CEO. Rather than running an ICO to gain funding for his project, MakerDAO was funded by several venture capitalist investments. MakerDAO is actually the longest running, and oldest DEFI project on Ethereum’s blockchain and is currently worth over $2 billion.
How is Maker Mined?
The MakerDAO system doesn’t need any miners to function. This is because it isn’t a blockchain, but rather a dapp built on top of the Ethereum blockchain. The DAI in the system are created when a user places collateral in the system, and the Maker are automatically made in response to a liquidation of loans on the platform. There is no mining needed to keep the system running.
Should You Invest In Maker?
Maker is a unique project, and is actually a reasonable investment if you believe in cryptocurrency. This is because Maker or MKR will become available when Ethereum is at a lower price, so by buying it, you are doing so with the belief that cryptocurrency(specifically Ethereum) will again rise in price. Which, if this happens, you will be able to sell your MKR for a small profit. This makes it a decent investment, especially if you are bullish on cryptocurrency.
But besides just investing in the aspects of this dapp, you should also look at the potential the app can give your investment portfolio. MakerDAO is full decentralized, meaning anyone can use their platform to loan themselves money. So rather than buying Maker, you should look into the possibility of getting a cryptocurrency loan from MakerDAO and what you can do with it. You may find that it is more worth your time and your Ethereum to loan yourself cryptocurrency and invest that, rather than purchasing Maker.
How Do You Buy Maker?
If you’ve decided you want to go for it and invest in Maker, then you will need to find an exchange that carries it. Even though it is quite popular, because Maker is only created during liquidation, it is quite scare in the cryptocurrency world. As of the writing of this article, you can purchase Maker on Coinbase, ShapeShift, Okex, Nova Exchange, and HitBTC, but not all exchanges offer Maker for USD so you may need to buy some Ethereum first. Be sure you have a compatible wallet, such as metamask, set up before you buy.
Overall, Maker is one of the better altcoins from a DEFI project out there in the cryptocurrency world. And if you believe in cryptocurrency as the future of society, it may be a worthwhile investment for you. Just be aware that there are always risks when it comes to investing in cryptocurrency and that you should never invest any money you don’t intend to lose.