Tokenomics Case Study Series: MakerDAO - An In-Depth Analysis

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Introduction

MakerDAO stands as a pioneering project in the DeFi space, renowned for its decentralized stablecoin $DAI. This article delves into MakerDAO's operational mechanics, tokenomics, and its groundbreaking collaboration with traditional finance—a partnership that signals new possibilities for DeFi's integration with conventional banking systems.

Key Takeaways:


1. Background: MakerDAO's Legacy and Evolution

Launched in 2017, MakerDAO has maintained its prominence despite the rise and fall of other stablecoin projects. Its recent collaboration with Huntingdon Valley Bank (HVB)—approved via community governance—highlights efforts to bridge DeFi with traditional finance through Real-World Asset (RWA) collateralization.

Why This Matters:


2. How MakerDAO Works: A Technical Breakdown

Core Mechanisms:

Example Workflow:

  1. A user deposits 10 ETH ($10,000) into a vault.
  2. They borrow 5,000 $DAI (collateral ratio: 200%).
  3. If ETH drops to $725 (145% ratio), the vault is liquidated.

3. Tokenomics: $MKR and $DAI Dynamics

Dual-Token Model:

TokenRoleKey Utility
$DAIStablecoinPegged to USD; used for loans and savings (DSR).
$MKRGovernanceVotes on protocol changes; burned via surplus auctions.

Economic Flows:

  1. Revenue Streams:

    • Stability Fees: Interest on loans (e.g., 2% annual rate).
    • Liquidation Penalties: Fees from liquidated vaults (13–16%).
    • PSM Fees: Charges for swapping stablecoins via Peg Stability Module.
  2. Auction Mechanisms:

    • Surplus Auctions: Excess $DAI buys back and burns $MKR.
    • Debt Auctions: Mint new $MKR to cover protocol shortfalls.

$DAI Peg Maintenance:


4. Real-World Assets (RWA) and Growth Strategy

HVB Partnership:

Why RWAs?
With Terra's collapse (2022), MakerDAO pivoted to RWA collateralization to:


5. Risks and Future Outlook

Challenges:

Opportunities:


FAQs

1. How does MakerDAO ensure $DAI stays pegged to $1?

Through DSR adjustments and PSM arbitrage, dynamically managing supply/demand.

2. What happens if my vault is liquidated?

You lose collateral covering the debt + fees; excess is returned.

3. Why collaborate with traditional banks like HVB?

To leverage credit expertise while scaling DeFi’s lending capacity.

4. How is $MKR’s supply controlled?

Via surplus auctions (burn) and debt auctions (mint), depending on protocol health.


Conclusion

MakerDAO’s RWA initiative exemplifies DeFi’s maturation, blending decentralized efficiency with traditional financial rigor. As HVB loans roll out, the protocol’s ability to innovate while maintaining stability will shape DeFi’s next chapter.

👉 Explore MakerDAO’s latest updates
👉 Dive deeper into DeFi tokenomics

For research purposes only. Not financial advice.
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