So I think it’s pretty clear that by now investors who are really into the market should get into at least one stablecoin. A lot of people have chosen to go into Tether (WHY?), maybe because that’s the easiest or most noticeable option but c'mon, seriously.
There are many better stablecoins out there and one that is really, really unique - MakerDAO. Well, the ecosystem actually has two tokens with the DAI currency being the stablecoin and the other token MKR being the utility token.
The MakerDAO ecosystem is very different from other stablecoins as it is governed by users on the network through the MKR token, which also acts as a governance token that can be used in voting proposals.
1. The MakerDAO Ecosystem is Growing
There are four major stakeholders in the MakerDAO ecosystem: users, traders, MKR holders and CDP creators. Together, these four ensure the systems growth. What’s interesting is that the ecosystem as a whole has been growing (not just users or traders, for example).
This I think is due to the relationship between the DAI and MKR tokens. The various fees to be paid on the platform need to be paid in MKR tokens, so there’s a dependency.
Now, because the stable value may sometimes go under, the stability mechanisms in place may cause the value of DAI to increase so that generating DAI with Ether may become expensive. This might cause users to hold onto their DAI tokens, limiting supply and increasing demand...which brings us to the next point.
2. 1 Million MKR Tokens in Circulation
There are only 1 million tokens of MKR in circulation, so if and when people are going to scramble for a solid stablecoin but find that there is a lack of supply of its governance token, it will push the price of MKR up when fees have to be paid on the platform. About 470,000 MKR tokens are with the team, but the rest remain with the crowd.
One more thing to point out is that if CDPs become undercollateralized, then MKR tokens are automatically created and sold on the market, increasing supply and bringing the price down.
I’ve mentioned the exact mechanism that MakerDAO uses to stabilize the value, but one more thing to note is that MKR holders can play a role in determining how this mechanism works exactly.
3. It is Not Collateralized by Fiat Reserves
One interesting way that DAI differs from something like Tether is that the stablecoin is collateralized with ETH. It’s not dollar reserves like Tether, which can then later be found to be lacking, but an already existing token that we should generally agree has a lot of worth. Being pegged to a crypto asset like Ether as opposed to being pegged to the fiat reserves is a big difference.
The potential trouble in MakerDAO’s Collateralized Debt Positions (CDPs) is its ability to maintain the $1 stable value, but the team has taken steps to ensure that DAI’s value remains as close to it as possible at all times through its Target Rate Feedback Mechanism (TRFM).