Welcome to our Deep Dive into DeFi with a study on MakerDAO, a decentralized lending and stablecoin issuance platform
Key Takeaways
- Maker is an innovative system that give users the means to borrow without having to go through a centralized exchange;
- Dai (DAI) is a crypto-backed, trustless stablecoin that acts as an on-chain alternative to its fiat-backed counterparts;
- Baked in incentives for all actors in the system should work well to maintain the protocol’s relative stability in the long run;
- Despite the theoretical soundness of the Maker protocol, there are major flaws in practice. The most significant is smart contract risk and the operation of the system under periods of network congestion, which in the past has led to periods of under-collateralization;
- DAI, though reasonably effective as a stablecoin, has much weaker price stability mechanisms compared to traditional stablecoins;
- It is unclear whether enough DAI can be issued to serve the needs of the crypto community, as this depends on many external factors;
- Maker governance will continue to iterate and improve on the protocol, as they have done in the past, so there is hope that they can fulfill their vision
Read the full PDF version of the MakerDAO Report here.
