Frequently asked questions

Question 1

What is Maker (MKR)?

Accepted Answer

Maker (MKR) is categorized as a decentralized ERC-20 governance token, it is used within the MakerDAO ecosystem, which is a decentralized finance (DeFi) project, the MKR token makes it possible for hodlers to vote on different proposals and updates, such as adding new collateral types, adjusting the risk parameters, and in general forming the MakerDAO system's overall policies and directions.

Question 2

When and who created Maker (MKR)?

Accepted Answer

Maker was originally developed and launched back in 2015 as the utility token for and by the MakerDAO foundation, which includes the founder Rune Christensen, who has a bachelor's in Biochemistry and a solid understanding of blockchain technology and the fintech sector. In 2024 the MakerDAO Foundation went through a rebrand and renamed to 'Sky', with the rebrand the project launched a new governance token called SKY token, Maker (MKR) will stay the same but can be exchanged at a rate of 1:28,000 for the new Sky Tokens.

Question 3

How Does Maker (MKR) Work?

Accepted Answer

MakerDAO is designed to facilitate Collateralized Debt Positions (CDPs) (now known as Vaults), where users have the ability to lock up cryptocurrency as collateral for minting the asset-backed stablecoin DAI. MKR tokens are also used to pay for 'Stability Fees' when users borrow/mint DAI, MKR also serves as the governance token for the protocol, allowing hodlers to participate in important decision-making processes.

Question 4

What are Maker's (MKR) use cases?

Accepted Answer

Maker offers several notable features: Decentralized Governance: MKR token hodlers can vote on different protocol changes and risk management deceisions through a decentralized governance system. Collateralized Debt Positions: Users can create CDPs to borrow DAI by locking up collateral, allowing for leverage and liquidity. Hashed TimeLock Contracts (HTLCs): Maker (MKR) use automated operations through HTLCs for completely trustless and transparent transactions. Integration with Other DeFi Protocols: DAI is used across many different DeFi platforms.

Question 5

Challenges of Maker (MKR)

Accepted Answer

Despite its promising features, Maker faces several challenges: Volatility of Collateral: The fluctuations in the value of cryptocurrencies used as collateral can pose risks to the stability of DAI. Regulation: Changing regulations around stablecoins and DeFi could impact Maker's operations. Governance Risks: Centralization of governance among MKR holders can lead to potential conflicts of interest. Market Competition: The rise of new or other stablecoins and DeFi projects creates an increasingly competitive environment. Smart Contract Vulnerabilities: As with any DeFi protocol, there is a risk of smart contract bugs or exploits.

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