MakerDAO is the decentralized autonomous organization governing the Maker Protocol — the oldest and most battle-tested DeFi lending system on Ethereum — which allows users to deposit accepted collateral assets (ETH, WBTC, staked ETH, real-world assets, and others) into smart contract Vaults, mint DAI (a decentralized stablecoin soft-pegged to $1 USD) against that collateral, and manage risk through MKR token governance; DAI is maintained at its peg via a system of stability fees, liquidation mechanisms, and the Dai Savings Rate (DSR), making it the foundational stablecoin of decentralized finance. Unlike USDC or USDT, DAI is not backed by fiat held in a bank — it is over-collateralized by crypto and real-world assets held in auditable smart contracts, with the MKR token serving as the system’s lender of last resort (MKR is diluted and sold if the system faces bad debt).
Key Facts
| Founded | 2014 (Rune Christensen) |
| Maker Protocol launched | December 2017 (Single-Collateral DAI, SAI) |
| Multi-Collateral DAI (MCD) launched | November 2019 |
| DAI supply (peak) | ~$9.4B (early 2023) |
| DAI supply (2025) | ~$5–7B (varies with DSR rate) |
| TVL | ~$7–12B (fluctuates with collateral values) |
| Governance token | MKR |
| Stablecoin | DAI (ERC-20) |
| Blockchain | Ethereum (primary); DAI bridged to many L2s |
| Stability Fee | Variable per collateral type (set by MKR governance) |
| Dai Savings Rate (DSR) | Variable (set by governance; reached 8% in 2023) |
| Liquidation ratio | Varies by collateral (ETH-A: 145%, WBTC-A: 145%) |
| Rebranded to | Sky Protocol (2024 Endgame transition) |
How the Maker Protocol Works
1. Vaults (Collateralized Debt Positions)
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Example:
- Deposit: 1 ETH at $3,000
- Min collateralization ratio: 145%
- Max DAI mintable: $3,000 / 1.45 = ~$2,068 DAI
- At 200% collat: borrow $1,500 DAI (safer)
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The borrowed DAI enters circulation as new supply. The user owes the principal plus accruing stability fees (interest, variable per collateral type).
2. Stability Fee
3. Dai Savings Rate (DSR)
4. Liquidation
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Vault undercollateralized →
Keeper bots trigger liquidation →
Collateral auctioned off →
DAI debt repaid + liquidation penalty (13% for ETH-A) →
Remaining collateral returned to Vault owner
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5. MKR as Backstop
Collateral Types
As of 2024–2025, Maker accepts a wide range of collateral, organized into “Vaults” with distinct parameters:
| Collateral | Type | Liquidation Ratio | Stability Fee |
|---|---|---|---|
| ETH-A | Crypto | 145% | Variable |
| ETH-B | Crypto (higher risk) | 130% | Higher |
| WBTC-A | Crypto | 145% | Variable |
| stETH | LST | 155% | Variable |
| USDC PSM | Stablecoin (PSM) | 100% | 0% |
| T-Bills / RWA | Real-World Assets | N/A | Via trust structure |
The PSM (Peg Stability Module) allows 1:1 swaps between DAI and USDC (and other stablecoins) with near-zero fees — a crucial peg mechanism, but one that introduced centralized collateral reliance.
Endgame and Sky Protocol (2024)
In 2024, Maker began executing the Endgame Plan — a massive restructuring proposed by founder Rune Christensen:
- MakerDAO → Sky: The overarching brand transition
- DAI → USDS: A new stablecoin replacing DAI (with opt-in features like optional compliance)
- MKR → SKY: MKR holders can migrate to SKY tokens (1 MKR = 24,000 SKY)
- SubDAOs: Specialized autonomous DAOs (e.g., Spark, Agora) operate under the Sky umbrella, each with its own token
- Spark Protocol: Maker’s own lending front-end (forked from Aave v3), allowing users to borrow DAI/USDS directly through Maker’s own UI
- Star system: Long-term plan to launch semi-independent “Stars” (blockchain ecosystems) funded by Sky governance
As of early 2025, DAI and MKR still exist alongside USDS and SKY during the transition period.
Real-World Assets (RWA)
Maker pioneered RWA collateral in DeFi — one of the most significant and controversial developments in decentralized finance:
- 2022: Maker begins onboarding real-world asset collateral via trust structures (Huntingdon Valley Bank, Monetalis, BlockTower)
- 2023: Over $1B in US Treasury bills and other RWAs onboarded; RWA stability fees become Maker’s largest revenue source
- Risk: RWA collateral requires trusting off-chain legal entities — a philosophical tension with DeFi’s trustless ethos
- Revenue: At peak, Maker earns $100M+/year from RWA income, enabling a high DSR (>8%) that attracted massive DAI deposits
Governance
Maker is governed by MKR token holders through on-chain governance:
- Executive Votes: Direct on-chain actions (change stability fees, add collateral, adjust DSR)
- Governance Polls: Non-binding signal votes to gauge community sentiment
- Maker Improvement Proposals (MIPs): Formal governance framework for larger structural changes
- Governance Guard: A security module that can veto malicious governance actions during a delay period
Notable governance events:
- March 2020: Black Thursday — ETH crashes 50% in one day, Maker faces $5.4M in bad debt; emergency governance activates to recapitalize via MKR dilution
- 2021: Maker votes to raise DAI ceiling multiple times as DeFi summer demand surges
- 2022: Maker debates “nuclear option” — removing all centralized stablecoin collateral (rejected as too risky for peg)
- 2023: DSR raised to 5% → 8% to attract DAI deposits during stablecoin yield competition
History
- 2014: Rune Christensen founds MakerDAO on forums; original whitepaper sketches collateral-backed stablecoin concept
- 2015: Development begins on Maker Protocol
- December 2017: Single-Collateral DAI (SAI) launches — backed only by ETH
- November 2019: Multi-Collateral DAI (MCD) launches — supports multiple collateral types, introduces DSR
- March 2020 (Black Thursday): ETH flash crash causes mass Vault liquidations; ~$5M bad debt due to zero-bid auctions; first and only emergency MKR dilution
- 2020–2021: DeFi summer massively expands DAI demand; DAI becomes foundational DeFi stablecoin
- 2022: Maker begins RWA collateral push; USDC PSM reaches billions in size
- 2022 (post-LUNA): Maker debates diversifying away from USDC after Circle’s centralization risks highlighted
- 2023: DSR raised to 8%; SubDAO framework announced; Spark Protocol launches
- 2024: Endgame transition begins; Sky/USDS/SKY brand introduced; MKR-to-SKY migration opens
- 2025: Both legacy (MKR/DAI) and new (SKY/USDS) systems operate in parallel