MakerDao and DeFi lending protocols

Nearly thousands of Defi projects emerge every month and most of them don’t even see the light
of the day. It is because of the marketing issues even if they have a strong innovative approach.

CEO at Bitmedia.io, Matvey Dyadkov explained this as,

“Brand awareness is achieved with CPM marketing, which helps projects become recognized.
Once brand awareness is reached, it is a good practice to switch to a more direct CPC campaign
and turn those who already know of your project into real users. Whilst display ads do wonders
when it comes to user acquisition, building a community around your brand is incremental to
retaining these users and switching them to returning, loyal audience base”.

However, many projects have stayed popular since their launch, and MakerDao is one of them!

What Is MakerDao, The Godzilla Of Defi

Currently, one of the most existing coins in the crypto market is MakerDao. And, the Maker
platform is a lending and borrowing platform. They are the ones who are responsible for the
creation of DAI stablecoin as well.

MakerDao is an Eth-based protocol that utilizes the Dai algorithmic stablecoin. Stable coins are
those crypto coins that are associated with a real-world asset. In other words, their values are tied
to them for example US dollar, gold, etc to make their value stable. The project of MakerDao is
focused on generating more stablecoins.

For your information, Maker is a decentralized, unbiased currency maker that offers the
advantages of digital money without any associated volatility and it is because of the advanced
mechanisms it uses that maintain price overall stability. Currently, the Maker has a circulating
supply of 5,228,096,678 DAI coins and the maximum supply is not available or limited. They
are constantly coming up with exciting upgrades and new features.

MakerDAO is one of the most widely used, currently one of the longest-running projects in the
ecosystem of Ethereum’s Defi. By the time of this writing, they have about 2.3M ETH locked in
their protocol, which is almost over 2% of the total ETH supply in the world.

How Maker Works, Its Tech And Mechanism?

Maker is a platform that is built using a bundle of smart contracts. It is based on the Ethereum
blockchain technology. The main purpose of the protocol is to monitor, support, and strengthen
the value of the stable coin, i.e DAI. As explained above, MakerDao is one of the most popular
and one of its kind projects in the world of Defi. As Maker is a decentralized platform so it
makes it possible for everyone to borrow and lend, in a very simple, more efficient, and
organized way, as compared to other traditional Defi platforms. The stated goal of the Maker is
“financial freedom without volatility.”

Maker (MKR) tokens are utility tokens used to pay transaction fees and to do transactions on the
ecosystem of Maker. The Maker protocol allows the token holders to have voting rights and that
is the reason it has a strong governance system in place as well. This approach helps them to
make sure that every user on the platform participates in the development of the Maker smart
contract actively and also in its native token MKR.

The Maker has successfully created a protocol that allows its users anyone with ETH and a
MetaMask wallet to lend themselves money in the form of a stablecoin which is known as DAI.
The mechanism of the platform works in such a way that when users lock up some Ethereum in
MakerDAO’s smart contracts, they can create a certain amount of DAI (stablecoin). It is worth
noting that the more Ethereum you locked up, the more DAI you will be able to create.
Moreover, this Ethereum serves as collateral for their DAI load, so if users are ready to unlock
the Ethereum they have locked, they can simply pay back the loan along with little fees.

DAI Token

As discussed earlier, DAI is a stablecoin, generated by MakerDao. On the Ethereum blockchain,

it is an ERC20 token that has a steady value equal to one US dollar. As it is generated by the
developing organization itself, it is also the main token and a key to the MakerDAO lending
system. DAI is created when a user took out a loan on MakerDao. DAI is the cryptocurrency that
they take and payback when they need it. Another token is the MKR (Maker) token. It was
created by MakerDAO and the primary purpose of this token is to maintain the stability of their
main DAI token. It also enables the governance of the Dai Credit System.

Some DeFi Lending Protocols

Today, there are many Ethereum based protocols like Aave, Compound, Uniswap, and Maker.
The mentioned protocols have become the most popular platforms for DeFi lending nowadays.
Each protocol allows users to lock their funds, mostly Ethereum in the platform they are using
and the smart contracts control how they work. In such protocols, no third party is authorized to
change the underlying code or contracts.
Protocols including Uniswap, Aave, Compound, and Maker are currently the leading lending
services with a strong track record as they are considered as reliable and secure platforms. You
will be amazed to know that at present, the total value locked in these lending protocols exceeds
$7 billion. They are also easy-to-use websites for executing these complex transactions so even a
non-technical person can make easy transactions with the help of these protocols.

The users sign a smart contract when they decide to lend or borrow cryptocurrencies from any of
these protocols. It automatically establishes the interest rate, the flow of their supply or request,
and when the contract expires depending on the locking values and details.

There is a pretty straightforward relationship between the borrowers and lenders in the Defi
space. Just like in real-world finances, lenders provide funds to these platforms to earn interest,
and borrowers pay interest to use those funds when they need them. It is mainly a relationship of
trust. After getting more common, thousands of parties are now constantly borrowing and
lending from one another without interacting with each other directly. By doing so, we are
creating a new opportunity to undergo decentralized finances that can solve our problems.