Feb 17, 2023


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Strengths and Weaknesses

+ Strengths

  • MakerDAO is one of the oldest and most stable decentralized autonomous organizations
  • Varied collateral options for different risk profiles
  • Easy $DAI borrowing through user-friendly design
  • Strong, passionate, active and very committed community
  • $DAI borrowing allows investors to access a stablecoin without selling assets
  • Decentralized and transparent, allowing for direct on-chain audits
  • Defi users can convert back their $DAI to $ETH at any time

- Weaknesses

  • Risk of flash loans attack
  • Governance centralization risk

Basic Information

MakerDAO is a decentralized platform that leverages the power of the Ethereum blockchain to offer a range of financial services. It enables users to save, borrow, and lend using a stablecoin called $DAI, which is collateralized by crypto assets. The platform enables individuals to engage in these financial activities without relying on intermediaries, as long as they hold $ETH and have a MetaMask wallet.


Functioning of the Protocols

MakerDAO enables individuals who hold $ETH and have a MetaMask or any other compatible wallet to engage in lending and borrowing activities, using the stablecoin, $DAI.

$DAI token is a decentralized, unbiased, collateral-backed stablecoin soft-pegged to the US dollar. It serves as the medium for facilitating loans against the collateral placed by borrowers on the platform.

Users can collateralize a certain amount of $ETH (or any other supported asset) in the MakerDAO protocol to generate a specific amount of $DAI. In order to release their $ETH from the platform, users must repay the loan along with any additional fees incurred.

The Maker Protocol operates through the use of two separate digital assets, known as $DAI and $MKR. These tokens play distinct roles within the system, enabling it to function. $DAI serves as the primary service provided by the Maker Protocol, while $MKR acts as the governance token for making changes to the software that supports $DAI.

The holders of $MKR tokens play a crucial role in determining the direction and management of the Maker Protocol. They are responsible for casting votes on proposals that affect the usage of $DAI, and for implementing technical modifications to the protocol. Additionally, they approve non-technical decisions on the blockchain.

The Maker Protocol operates differently from traditional lending practices in that it uses crypto assets as collateral rather than cash. Users can borrow loans using multiple crypto pairs supported by the protocol. For instance, a user can use an $ETH/$DAI trading pair to borrow $DAI by providing $ETH as collateral. Borrowers deposit the collateral in smart contracts called Maker Vaults within the protocol.

Maker Vaults

A Maker Vault is a smart contract on the Ethereum blockchain that enables users to use their crypto assets as collateral in order to acquire the stablecoin, $DAI. This process of creating a Maker Vault is known as "opening a CDP" (Collateralized Debt Position) and is used to borrow $DAI.

The amount of $DAI that can be generated is based on the value of the collateral, and the collateralization ratio established by MakerDAO. Users can also close their vault by repaying the borrowed $DAI, together with any interest and fees, in order to retrieve their collateral. The Maker Vault is a crucial component of the MakerDAO ecosystem, providing users with access to the stablecoin, $DAI.

Users can access the Maker Protocol and create vaults through various interfaces, including Oasis Borrow and those built by the community specifically such as InstaDapp and DeFi Saver.



Generating $DAI comes with the obligation to repay the borrowed $DAI and the stability fee to withdraw the collateral locked inside the vault. The stability fee can be seen as the cost for obtaining $DAI by minting it. This fee accumulates over time and can be paid using either $MKR or $DAI.

When the stability fee is increased, it becomes more expensive to borrow $DAI. This decrease in demand for $DAI will encourage CDP holders to create less of it and / or to destroy existing $DAI to retire their debt in CDP. As a result, raising the stability fee can help bring the value of $DAI back to its target rate.

The stability fee is a yearly percentage charge on $DAI generated by vaults. It is adjusted by Maker Governance and applies to all vaults of the same type. The stability fee is mainly used to compensate the Maker Protocol for the risk it incurs due to fluctuations in the value of the collateral that backs the generated $DAI. Additionally, it acts as the primary source of income for the Maker Protocol.

The interest rates for each type of collateral are determined by the risk associated with it, and current market conditions. These rates can be adjusted by the governing body of Maker, known as Maker Governance, with suggestions from risk teams elected through governance. Once established, the rates stay the same until they are modified again by Maker Governance. It is recommended that those who own vaults, known as Vault Owners, regularly check the rates to ensure their vaults have sufficient collateral.

Users can use the Maker Protocol through the Oasis Borrow interface, which is the gateway into the Maker Protocol. The Oasis Borrow platform has different features and associated fees. Multiply action, which increases the user’s position in $DAI by borrowing more, has a fee of 0.2 % on the amount borrowed.

The earn strategy can be utilized at no cost to the user; however, they will be responsible for paying the necessary transaction fees. Users who engage in multiple positions or utilize the Maker Vault will also need to pay a continuous stability fee to the Maker Protocol. There is no cost associated with borrowing, but fees for using the Ethereum network will apply. These stability fees will go directly to the Maker Protocol, not to the Oasis.app. It's important to keep in mind when borrowing $DAI, that there is a 13 % penalty for liquidation. Currently, the stability fee rates may vary between 0.5 % and 3.5 %.



Price Oracles

The Maker Protocol uses a decentralized Oracle infrastructure to obtain real-time information about the market price of the collateral assets in Maker Vaults, in order to trigger liquidations. $MKR voters select trusted Oracle feeds to provide price information through Ethereum transactions, and also control the number of feeds in the set. The Maker Protocol receives price inputs through the Oracle Security Module (OSM) to protect the system from an attacker attempting to gain control of a majority of the Oracles. The OSM delays a price for one hour, allowing Emergency Oracles or a Maker Governance vote to freeze an Oracle if it is compromised. Decisions regarding Emergency Oracles and the price delay duration are made by $MKR holders.

Emergency Oracles

$MKR voters select Emergency Oracles to act as a security measure against any possible attacks on the governance process, or on other Oracles. These Emergency Oracles are empowered to halt specific Oracles (e.g., $ETH and $BAT Oracles) to prevent a large number of users from withdrawing their assets from the Maker Protocol in a short period of time. They also have the authority to trigger an emergency shutdown.


MakerDAO operates as a decentralized, community-governed organization, free from the influence of centralized entities or intermediaries. The project's governance is carried out by holders of its MKR token, with a global community of individuals leading its direction. Through various partnerships and an active developer community, MakerDAO has established a prominent position in the decentralized finance (DeFi) space. $DAI, the stablecoin generated by MakerDAO, is widely accessible and easy to use, offering financial freedom and opportunities to individuals worldwide.

MakerDAO is a unique and valuable protocol for several reasons. Firstly, it uses a decentralized Oracle infrastructure to provide real-time information on market prices, which helps to protect the system from any potential attackers. Secondly, the stability fee mechanism helps regulate the supply and demand of $DAI, ensuring its stability as a stablecoin pegged to the US dollar. This not only benefits users who need a stable currency, but also serves as a source of income for the Maker Protocol. The stability fee compensates the protocol for the risk it incurs, and provides a further layer of security to the system. These features make MakerDAO a valuable and reliable protocol in the world of decentralized finance.


The MKR token is the governance token of the Maker Protocol, which has a governance system in place that involves two steps: first, a community poll to gather opinions and feedback, and second, an Executive vote to approve or reject changes to the system. The Executive vote is used to make decisions such as approving new collateral types. The process is controlled by smart contracts, which govern each vote.

Anyone can create a proposal, and MKR token holders can vote for the proposal they want to be the active one. The proposal with the most votes is chosen and given the power to make changes to the internal governance variables of the Maker Protocol.

The $MKR is used in the Maker Protocol for two things: voting on changes to the system, and helping to keep the system financially stable. If the system owes more money than it has, the supply of $MKR can be increased through a special auction to bring the system back to a stable financial state. This means that holders of $MKR tokens have an incentive to make responsible decisions and avoid taking too much risk, so that the system doesn't need to increase the supply of tokens.

Even though any other third party considered as a non-$MKR holder can participate in discussion on proposals for MakerDAO by posting in the forum's threads, only $MKR holders have the ability to vote. The weight of any vote is determined by the amount of MKR tokens in support of a proposal.

Although MakerDAO claims to be decentralized, it has been criticized for the involvement of humans in decision-making processes, such as modifying CDP types and controlling the set of trusted oracles.


Revenue and Tokenomics

The Maker Protocol's main source of income is the stability fee, which is used to compensate for the risk of fluctuations in the value of the collateral backing the $DAI. This fee is used to cover the expenses of running and expanding the protocol, maintaining the Oracle feeds, and repurchasing and destroying MKR tokens to reduce the overall supply. It also serves as a form of compensation for the Maker Governance for their role in managing the protocol and acting as a lender of last resort.

MakerDAO initially launched with a supply of 1 million MKR tokens. There is currently a circulating supply of around 901 310 $MKR with a market cap of over 630 682 360 USD, and is currently trading on 78 exchanges. There are several centralized exchanges on which investors can buy and sell $MKR, including Coinbase, Binance, KuCoin, Huobi, OKX, Kraken, Gate.io, and Bitfinex.

Despite a decrease in total value locked at the beginning of 2022, MakerDAO remains a leading DeFi protocol. Recently, there has been a resurgence of investor interest in the protocol, as evidenced by an increase in the LTV (Loan-to-Value), which was at 6.09bn USD at the end of December 2022 and is now at 7.2bn USD (January 2023).

The total value locked (TVL) is 7 201 238 274 USD.

The original token allocation was:

  • 69.5 % to founders and projects
  • 15 % to the team
  • 4 % to Seed Round 1
  • 6 % to Seed Round 2
  • 5.5 % to Seed Round 3
Recently, MakerDAO has given the green light to allocate 100 million worth of $USDC to Yearn Finance. These funds will originate from the Peg Stability Module and will be deposited into a non-custodial vault on Yearn, resulting in an estimated 2 % annual return for MakerDAO. Furthermore, MakerDAO has partnered with Coinbase, with the exchange being responsible for the safekeeping of 1.6 billion worth of $USDC from MakerDAO. As a result, MakerDAO will earn a 1.5 % reward on its $USDC, which will provide additional revenue for the organization's operations, or attract new users. Additionally, MakerDAO has collaborated with Centrifuge and BlockTower Credit, resulting in the inclusion of 220 million worth of Real-World Assets (RWA) in the DeFi ecosystem. RWAs have significantly contributed to MakerDAO's revenue, currently accounting for half of its income and most of its revenue.

The Uniqueness of the Protocol

MakerDAO offers a wide range of collateral options for its stablecoin, $DAI. Unlike its biggest competitor, Liquity, which only offers one collateral asset ($ETH) and has a total value locked (TVL) of 512.84m USD, MakerDAO offers over 20+ collateral alternatives, including $ETH and $wBTC. Additionally, MakerDAO's multi-collateral $DAI (MCD) allows for the collateralization of multiple assets, offering even more flexibility and options for users. Abracadabra, another major competitor, may offer 19 collateral assets, but it still falls short of the offerings provided by MakerDAO. Furthermore, MakerDAO's Emergency Oracles serve as a safeguard against potential attacks on the platform's governance or other oracles, providing an added layer of security for users. Overall, the wide range of collateral options and added security features make MakerDAO a unique and attractive choice for users in the DeFi space.

Development History

In 2014, the creation of the Maker Foundation took place. One year later, MakerDAO was created by the Maker Foundation as an open-source project, with the goal of providing financial autonomy and opportunities for everyone. In 2017, it introduced the Maker governance token ($MKR) and the first version of its stablecoin, the Single Collateral $DAI (SAI), which was backed by ether ($ETH). In 2019, the foundation advanced the platform by releasing the multi-collateral $DAI (MCD) and phasing out the use of SAI.

The biggest change in the Maker Protocol happened when the community allowed any Ethereum-based assets to be used as collateral for $DAI, but only after $MKR holder approval and the setting of specific risk parameters through decentralized governance. This change brought greater flexibility and options to users of the Maker Protocol.

With the MCD upgrade came several new features that were introduced to improve the system. Among these new features were the introduction of the new DAI token, support for multiple vault collateral types such as $ETH and $BAT, the launch of the $DAI savings rate, more robust peg ensuring mechanisms with $MKR acting as a backstop, and the implementation of stability fees being paid every block, instead of only when $DAI being repaid. These new features were aimed at making the system more efficient and reliable for all users.

Milestones worth mentioning:

In November 2015, the MakerDAO team presented at DevCon1, and in May 2017, the first version of $DAI, called ProtoSai, was launched. In December 2017, the Sai white paper was published, which outlined the final design for Single-Collateral Dai and a roadmap for the future. In December 2017, Single-Collateral Dai went live and it kickstarted the DeFi movement. Multi-Collateral Dai was launched in November 2019 and the MKR token contract was transferred to Maker Governance in March 2020. In March 2021, the Core Units framework was ratified, paving the way for decentralized management of all Maker Protocol teams and activities. On July 20, 2021, the founder of MakerDAO announced the full decentralization of MakerDAO, and the global Maker community is now responsible for every aspect of the Maker Protocol, and the DAO.

The introduction of Single-Collateral Dai in 2017 has resulted in a significant increase in usage of the stablecoin, making it a key element in decentralized applications that support the growth of DeFi. The popularity of $DAI is in line with the overall trend of stablecoins in the industry.

Road Map

Since its introduction in 2014, MakerDao has achieved significant milestones. The DAI stablecoin, which is based on the Ethereum protocol, was one of the first of its kind, and has seen a significant increase in usage since it was fully launched in 2017.

  • 2021 - the co-founder of MakerDAO announced the full decentralization of MakerDAO and the Foundation dissolved
  • 2022 - MakerDAO undergoes a division into two factions, stemming from the proposed 'Endgame' plan by founder Rune Christensen. This plan involves separating MakerDAO into two entities, called MetaDAOs and Synthetic ETH. MetaDAOs are subdivisions of MakerDAO that are intended to separate activities from the governing DAO. Additionally, the plan includes allocating extra $DAI to buy staked ethereum ($stETH).

The Maker Protocol is dedicated to promoting the wider adoption of $DAI. Recently, MakerDAO started to expand the use of $DAI in the field of real-world asset collateralization, and also started enabling near-instant transactions and faster withdrawals across Ethereum.

To ensure its financial stability by 2023, MakerDAO is investing 500 million USD of its overcollateralized stablecoin into US treasuries and corporate bonds. The allocation of the funds consist of 80 % in short-term US treasury bonds and 20 % in investment grade corporate bonds. This diversifies its assets and expands its revenue streams, limiting exposure to a single asset and providing more stable income for the protocol.

Another MakerDAO Road Map milestone for 2023 includes reforming Maker Governance based on DVCs (Decentralized Voting Contracts). DVCs are a way for voters to choose their delegates and vote for strategies using the Ethereum blockchain and various smart contracts.


MakerDAO, as a decentralized and stable source of value in the form of $DAI, has become an essential part of the DeFi ecosystem. With over 500 centralized and decentralized platforms utilizing $DAI, and a large amount of assets locked into the protocol, it has become a trusted foundation in the DeFi space. MakerDAO was the first to introduce the concept of reliable Oracles on the Ethereum blockchain, which has since been adopted by many decentralized applications to secure their systems and provide accurate price data. The confidence in MakerDAO and the Maker Protocol enables the organization to expand its core Oracle infrastructure service to better meet the needs of decentralized applications.

Examples of real cases are: The integration of MakerDAO  with the Ethereum Layer-2 network, StarkNet Dai bridge. This enables near instant token withdrawals from L2 to L1, and also handles near instant transactions and faster withdrawals across the Ethereum network. Also, the integration of the $DAI on top of the Optimism Layer 2 solution, allowing near instant token withdrawals from L2.

MakerDAO's Engineering Core Unit has developed a technology called Maker Teleport, which facilitates the transfer of funds between different Layer-2 networks. This technology allows for direct and fast transfers of the stablecoin $DAI across various chains that are connected to Ethereum. It is available on scaling solutions like Arbitrum and Optimism, as part of MakerDAO's efforts to expand $DAI's reach to multiple blockchain networks. This is particularly useful for $DAI users as it reduces the fees and settlement time for moving $DAI between Ethereum and Layer-2 networks, which previously could take anywhere from 30 minutes to a few days. This is especially helpful during periods of high activity on the Ethereum network, when transaction costs can be high.


Rune Christensen is the co-founder of MakerDAO. Starting in 2015, the MakerDAO project brought together developers from all over the world to collaborate on the initial versions of code, design, and documentation. MakerDAO employs 115 personnel. The management team includes Rune Christensen as the Founder, Jesus Perez as the Chief Executive Officer, and Ethan Bennett (Chief Technology Officer).

Product & Eng: Ethan Bennett (Chief Technology Officer).

Finance:Torben Jorgensen (Chief Financial Officer).

HR: Spandana Suddapalli (Senior People Operations).

Legal: Mariano Conti (Developer).

Marketing: Coulter Mulligan (VP, Marketing & Communications).

Operations: Niklas Kunkel (Oracle Core Unit Facilitator)

Sales: Matthew Cooper Business Development Manager

Github MakerDAO has 33 developers.

MakerDAO's headcount was reduced by 19 people (-10.38 %) in 2022.

Community and Marketing

The MakerDAO Discord community has almost 15 000 members, the Telegram group has almost 13 000 members and their Twitter profile has more than 230 000 followers. Among all these social networks, the Discord community appears to be the least active. However, on Twitter, there is a very active community that posts on a frequent basis.

The MakerDAO community, composed of individuals from all over the world, plays a vital role in the management and development of the Maker Protocol. The Decentralization Autonomous Organization (DAO) has reached a point of self-sufficiency, and as a result, the Maker Foundation has completed its responsibilities of fostering growth and development.

Consequently, the DAO dissolved the Maker Foundation in the final months of 2021. The Foundation served a crucial purpose in advancing the Maker Protocol, but it was always intended to be a temporary entity.

The DAO community, including developers and contributors who have provided valuable input on various aspects such as modules, user experience, and more, is a dedicated and united team known for their proactiveness, passion, and hard work. From its inception, the MakerDAO community, led by Rune Christensen and a group of committed developers, has worked tirelessly to evolve from a DAO to a foundation that drives a remarkable project forward.

Investors and Partners


In 2018, Andreessen Horowitz purchased 6 % of the total value of the MKR token in circulation at the time. This gave a capital push worth 15m USD to the protocol.

MakerDAO has raised a total of 79.5m USD in funding over 7 rounds. Their latest raise was on Apr 30, 2020 from an Undisclosed round.

MakerDAO has 36 investors, including AZ Digital Asset Group, Collab+Currency, FinTech Collective, Global Blockchain Innovative Capital, Hack VC, Onomy, AVA Labs, Bitfinex, CMS Holdings and undisclosed investors.


MakerDAO has hundreds of partnerships, including Coinbase, which is a longstanding partner. Through the years, Coinbase has had a long history of cooperation with MakerDAO, in particular. They provided liquidity to the protocol through their USDC Bootstrapped Fund and also supported $DAI since it launched full support for the stablecoin on Coinbase Card. It was also the first stablecoin to be listed on Coinbase Earn. Additionally, Coinbase has introduced DeFi yields using the $DAI stablecoin for customers in more than 70 countries.

Recently Coinbase and MakerDAO partnered for an institutional USDC rewards program. As a result, MakerDAO will start to earn up to 1.5 % rewards on the $USDC.

Another significant partnership from MakerDAO was the one with Centrifuge and BlockTower Credit, to bring 220 million USD’s worth of real-world assets (RWA) into the DeFi ecosystem. This partnership allows BlockTower to issue $DAI loans backed by these RWAs, and will bring transparency. Meanwhile, for MakerDAO, this partnership enables the protocol to access a more varied range of assets, making its stablecoin, $DAI, more robust and helping the DAO generate additional revenue streams.

More recently, in December 2022 the protocol entered into a strategic alliance with GnosisDAO for the launching of the DAO-to-DAO strategy. As a result, MakerDAO could use GnosisDAO's token, GNO, as collateral. Along with that, GnosisDAO could use $DAI as the prominent stablecoin in its ecosystem.

Other notable partners have been Aave D3M, Airtm, Althea, REINNO, The World Bank, NodeBrick and Polychain Capital.

Risks and Decentralization

MakerDAO offers a decentralized, permissionless, stable store of value that has become an essential part of the DeFi ecosystem. MakerDao also offers a non-custodial application and no KYC is needed to interact with the protocol. The overall level of decentralization is high.


The potential risks associated with MakerDAO include the possibility of certain digital currencies losing value and being unable to serve as collateral.

Some decisions made by the community may result in investors withdrawing their funds from the Maker Protocol in the short term, which could be one of the reasons why MKR token holders might be disposing of their tokens. This could be due to events such as MakerDAO's announcement in December 2022 confirming the activation of settlements for several stablecoin vaults whose collateral ratios fall below the minimum threshold of 101 %; or the approval by the community of splitting into two factions due to founder Rune Christensen's 'Endgame' proposal.


DAI is a stablecoin that is supported by a greater amount of cryptocurrency assets than its own value, making it over-collateralized. Unlike traditional fiat-backed stablecoins or algorithmic stablecoins, $DAI is backed by $ETH that is held in public, transparent smart contracts on the Ethereum blockchain. This allows for real-time verification of the system's health and backing. Additionally, $DAI allows for Peer-2-Peer (P2P) transactions without the need for a trusted intermediary. It is known for its safety and security due to its over-collateralized nature, transparency, decentralized structure, and lack of centralization around a single controlling party. MakerDAO, the organization behind $DAI, also provides a Github repository dedicated to transparency and regularly publishes transparency reports for the community to review. Additionally, the protocol includes an emergency shutdown feature to protect the ecosystem in case of severe emergencies, such as long-term market irrationality, hacks, or security breaches. In this way, the protocol ensures that all users receive the net value of assets they are owed.

Protocol Security and Audits

The DAI stablecoin is supported by an excess of collateral that has been placed in secure and transparent smart contracts on the Ethereum blockchain. The collateral can be audited and viewed by anyone with an internet connection at any time through the website, making it easy for anyone to check the status of the system.

MakerDAO, the second largest DeFi protocol in the world, is committed to ensuring the safety and security of its ecosystem and its users. To achieve this goal, they have partnered with three leading independent security auditors to protect against potential vulnerabilities. Trail of Bits, a security firm, has conducted security reviews of MakerDAO's MCD smart contracts; ChainSecurity has performed several smart contract audits of MakerDAO, including DSSProxyActions, DSS-Charter Smart Contracts, StarkNet-DAI-Bridge, Liquidations 2.0 and Optimism DAI Bridge audits; Callisto Network has conducted a Maker Token ($MKR) Security Audit and PeckShield; and another security firm has conducted a traditional audit. There have also been runtime verification-based techniques to improve the safety, reliability, and technical “correctness” of software systems. These partnerships and audits demonstrate MakerDAO's dedication to maintaining the highest levels of security and trust for its users and the wider community. Overall, the partnership is proof of MakerDAO's commitment to creating a secure, decentralized financial ecosystem for its users.

Another commitment from the protocol was to ensure the security of its MCD smart contracts through a multi-layered approach. One key component of this strategy is the Bug Bounty Program, which invites industry experts and security researchers to test and report any vulnerabilities they may find. This program is run by the Immunefi Security core unit, which was established through a collaboration between two decentralized organizations. The program is governed by the terms set in MIP64, which aims to make the payment process for small bug bounties more convenient. The roll-out plan for the program was launched in February 2022 to ensure that all infrastructure was in place.

Makerdao audit




Analyst Opinion

MakerDAO is one of the oldest protocols and probably one of the first DeFi dApps I ever used. MakerDAO is one of the pillars of deFi itself.

MakerDAO is actively working to increase revenue, diversify assets, and generate more returns over time. This approach reflects their commitment to growing their ecosystem, empowering their community and users, and advancing their mission of creating a global financial future built on decentralized rails. $DAI is playing a key role in creating an open financial system that is more efficient and equitable, bridging the gap between the crypto and fiat worlds.

Peter Nemcok


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