Introduction to MakerDAO
MakerDAO is a decentralized autonomous organization built on the Ethereum blockchain, enabling peer-to-peer lending and borrowing of cryptocurrencies without intermediaries. The platform operates using two native tokens:
- DAI: A stablecoin pegged to the US dollar.
- MKR: The governance token for protocol decisions.
The Maker Protocol allows users to generate DAI by locking collateral in Maker Vaults. This guide walks you through the entire borrowing process, from vault creation to debt repayment.
Key Components of MakerDAO
The Maker Protocol
Managed by the MakerDAO community, the protocol comprises smart contracts that:
- Enable DAI generation via collateralized assets.
- Maintain DAI stability through risk parameters monitored by MKR holders.
Oasis App: Gateway to MakerDAO
The Oasis interface (oasis.app) facilitates interactions with MakerDAO, offering:
- Trade: Swap DAI/other tokens.
- Borrow: Generate DAI using collateral.
- Save: Earn interest via DAI Savings Rate (DSR).
Step-by-Step Guide to Borrowing DAI
1. Accessing the Borrow Feature
- Navigate to Oasis’s Borrow page.
- Connect a supported wallet (e.g., MetaMask, Ledger).
2. Creating a Maker Vault
- Select Collateral: Choose from assets like ETH-A, viewing key metrics (e.g., stability fee, liquidation ratio).
- Deposit Collateral: Specify the ETH amount to lock.
💡 _Minimum DAI generation: 100_. - Generate DAI: Enter the desired DAI amount, ensuring your collateralization ratio stays above 150% to avoid liquidation.
👉 Learn more about collateral ratios
3. Managing Your Vault
- Monitor Vault Health: Track collateralization ratio and debt in the "Overview" tab.
- Repay Debt: Use DAI to reduce outstanding debt before withdrawing collateral.
- Withdraw ETH: Retrieve collateral after full debt repayment.
Advanced Features in Oasis
Trading Options
- Market Orders: Place limit orders via the order book.
- Instant Swap: Quick token exchanges with auto-calculated rates.
- Multiply: Leverage positions up to 2x using ETH collateral.
Token Management
Unlock tokens via the "Balances" tab before trading.
Risks and Best Practices
- Liquidation Risk: Maintain collateralization above the threshold (150% for ETH-A).
- Stability Fees: Accrued over time; factor into repayment plans.
- Oracle Pricing: Collateral values are tracked by MakerDAO’s oracles.
FAQ Section
1. What’s the minimum DAI I can borrow?
The minimum borrow amount is 100 DAI.
2. How do I avoid vault liquidation?
Keep your collateralization ratio above 150% (for ETH-A) by depositing additional collateral or repaying DAI.
3. Can I change my collateral type after opening a vault?
No, each vault supports one collateral type. You’ll need to create a new vault for different assets.
4. How are stability fees calculated?
Fees accrue annually as a percentage of your DAI debt and are payable in MKR.
5. Where does the generated DAI go?
DAI is sent directly to your connected wallet (e.g., MetaMask).
6. Is there a deadline to repay the debt?
No, but unpaid stability fees increase your total debt over time.
Conclusion
MakerDAO pioneered decentralized lending with its DAI stablecoin, combining transparency with robust risk management. While competitors emerge, its proven track record and high TVL solidify its position in DeFi.
For further reading, visit the official MakerDAO website.
👉 Explore advanced DeFi strategies