Maker is a decentralized smart contract platform that has the goal of creating a token with a stable price. Through the platform, users can collateralize tokens they owned to exchange them for DAI on the Maker platform.
The objective of the DAI is to achieve a fixed 1:1 exchange rate with USD. In order to solve the problem of price volatility in collateralized tokens influencing the overall price of the DAI, Maker uses an over-collateralization scheme: when users pledge collateral, the amount they pledge is higher than the value of the DAI they will receive. In this way, fluctuations in the value of the collateralized tokens can be absorbed by the excess amount, making the price of the DAI stable.
Aside from this, on the Maker platform, there is also a dynamic state adjustment system which helps to adjust the over-collateralization ratio and helps to provide the necessary assistance to stabilize the price of the DAI through a stable market. Through the use of smart contracts, Maker has made the entire process decentralized. There is no single entity that can control the amount of DAI circulating on the market, the circulating amount being decided by users exchanging assets for DAI on the Maker platform. Through this kind of method, Maker tries to maintain a stable price for the DAI when in a consistently stable supply and demand situation.
Aside from the DAI, Maker also has another token, MKR. MKR is the platform's governance token and is used for the administration of the platform and voting. When there is a proposal to be decided about the platform, holders of MKR can express their opinions via a vote. MKR allows its holders to directly participate in the process of governing DAI. Every holder of Maker tokens has the right to vote on a number of changes to the Maker Protocol, with their voting power depending on the size of their MKR stake. This ability to participate in the management of stablecoins is what drives the demand for MKR tokens and correspondingly affects their value.
