Maker: A Lending Protocol in the DeFi Pulse Index
Maker (MKR) is an ERC-20 token released in 2020 as the governance token for MakerDAO and Maker Protocol, a lending and borrowing protocol.
March 10, 2022
Maker (MKR) is an ERC-20 token released in 2020 as the governance token for MakerDAO and Maker Protocol, a lending and borrowing protocol. It is one of several tokens currently held within the Index Coop’s DeFi Pulse Index (DPI).
- What is Maker?
- Who created Maker?
- Maker Governance
- Why is MKR included in DPI?
- How can I buy MKR?
What is Maker?
Maker (MKR) is the governance token for MakerDAO. MakerDao is an open-source project built on the Ethereum blockchain that allows users to generate Dai by leveraging assets approved by MakerDao Governance. Dai is a decentralized and collateral-backed stablecoin soft-pegged to the USD. This means that the price of the Dai loosely follows the price of the USD. This is achieved through a system of smart contracts on the Ethereum blockchain.
MakerDAO was launched in 2017 and was the first project to issue a stablecoin in the Defi space. The stablecoin allowed investors to participate in the Defi ecosystem who may have been otherwise reluctant due to volatility of cryptocurrencies. Stablecoins have grown in popularity since MakerDAO and play an essential role in Defi by offering more financial stability.
Investors receive Dai when they provide ETH to MakerDao’s liquidity pool. Investors can then borrow up to two thirds the amount of Dai they put into the liquidity pool in ETH. Dai’s price is backed by 1.5 times the amount of ETH. As of October 2020, there was $2 billion worth of value locked into the liquidity pool. There is currently more than 9.7 billion Dai in circulation.
In July of 2020, MakerDAO became the first defi protocol to reach $1 billion in total locked value. In the third quarter of 2020, Dai’s total supply increased by 623%. Though the increased demand made it challenging to maintain the one-to-one tie to the USD, it eventually did return to, after a series of changes implemented through the MakerDao Governance.
MakerDAO was one of the first Defi projects to achieve success as a decentralized autonomous organization, setting precedence for the potential of DAOs in the Defi ecosystem long-term.
Over the years, Dai’s one-to-one ratio to the USD hasn’t always remained perfect. In March 2020, for example, the values of Dai spiked to $1.10, a sign the protocol wasn’t functioning as it should. Since then MarkerDao Governance established new systems to mitigate risk and Dai was restored to a $1.00 value. Dai has not fluctuated to this extent since.
Who created Maker?
MakerDao was founded by Danish entrepreneur, Rune Christensen. A graduate of the University of Copanhagen’s Business School, Christensen originally became interested in stablecoins after Mt. Gox was hacked in 2014. He launched MakerDAO the following year with to create an avenue for more people to participate in a more transparent financial system.
Maker Governance
MakerDAO is a decentralized autonomous organization and holders of the MKR token are able to vote on and make proposals on the current and future parameters of MakerDAO, such as stability fees, DAI savings rate and collateral types/rates. A community member’s voting power is proportional to the amount of MKR they hold.
Why was MKR included in DPI?
Stablecoins are an important part of the defi ecosystem, and MakerDao is at the forefront of this essential infrastructure. MakerDao is also the most popular decentralized finance application on the Ethereum blockchain.
There are currently several stable coins backed by the USD — USDC, issued by Coinbase and GUSD, issued by Gemini, for example. However, while Coinbase and Gemini are privately held companies, Dai is truly decentralized as it is maintained through a DAO and collateralized through the MakerDAO protocol.
How can I buy MKR?
You can invest in Maker and other leading blue chip DeFi assets by buying DPI which includes MKR tokens. You can buy DPI directly from the Index Coop by connecting your wallet to the Index Coop app.
If you’re looking to exchange a fiat currency, like the U.S. dollar, directly for DPI, then you’ll want an Ethereum wallet like Argent, Gemini, Metamask, or Rainbow. With each of these wallets, you can connect to your bank account or debit card, which allows you to exchange fiat currencies directly for Index Coop products like DPI.
What is DPI?
The DeFi Pulse Index ($DPI) is a digital asset index that tracks the performance of “blue chip” decentralized financial (DeFi) assets across Ethereum. It combines the features of an ERC-20 token and a traditional structured product to create a 21st-century digital upgrade to traditional structured products. DPI is capitalization-weighted based on the value of each token’s circulating supply and aims to track projects that have significant usage and show a commitment to ongoing maintenance and development.
As a bundled crypto investment asset, you effectively own all of the underlying tokens and can redeem your units of $TOKEN for the underlying tokens, a feature of traditional structured products that is typically reserved for large, institutional investors.
As an Ethereum-based crypto-asset, $DPI can be used productively throughout DeFi with opportunities for liquidity provision (LP), borrowing and lending, yield farming, and collateral debt position (CDP)
DPI was launched jointly by Set Protocol and Scalara (formerly known as DeFi Pulse Inc.), and was the first product to be managed by the Index Coop.
About Index Coop
Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.
How to buy Index Coop products with fiat currencies:
- First, you’ll need to create an Ethereum wallet like Argent, Metamask, Gemini, or Rainbow.
- Next, you’ll set up your new wallet and connect your bank account.
- Once you’ve deposited fiat currency in your wallet you can exchange it for Index Coop products like DeFi Pulse Index (DPI) or the Metaverse Index.
You can also earn or buy MKR tokens directly via your favorite decentralized exchange.
>>Click here to buy DPI Tokens
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