Crypto Coins Featured ICO Review

What is Maker Coin and How Does it Work?

There are two things preventing Cryptocurrencies from becoming mainstream: scalability and Stability. Without both Bitcoin and all altcoins will be no more than an amusing hobby with no real world application. EOS, Cardano, IoTA, Zilliqa, and many others are hard at work solving scalability. In the same way Tether, Havven, Truecoin, Basis, and Maker are competing to develop a true stabilized protocol. Maker is gaining notoriety as a game changer due to its unconventional approach that includes the DAI, CDPs, and collateralized rates.


The Dai is a stable coin part of Maker’s dual token system; like Tether, it is equivalent to one USD. But unlike Tether it doesn’t depend on cash reserves to keep it equal to the dollar . Instead it uses a system of smart contracts and percentage algorithms to raise or lower its value and remain stable.

Collateralized Debt Positions

Maker plans to apply brute force to stop volatile price swings by using strong arming contracts. Basically CDPs are smart contracts where an X amount of Ether is deposited and maintained in escrow.  In return, the buyer creates an amount of DAIs equivalent to the market price of Ether guided by an interest rate or collateralized ratio. For example, One Ether deposit at 150% rate will receive 66 Dais. Therefore, each 100 Dais are backed by 1.5 Ether collateral. In other words, Maker’s stabilizes by having a collateral fund of Ether at all time. Once the deposit is made, the investor has no control over its Ether and can only get it back when the user returns the Dai thereby closing the contract.

Target Rate Feedback Mechanism

The TRFM is the third component of how Maker remains stable during volatility. And its very simple to understand. It’s a percentage algorithm that monitors the market and adjusts the CDP percentage in order to maintain sufficient collateral value. This is not unlike the “Basis” algorithm which controls its entire coin supply in order to maintain a consistent value to that of the USD. The TRFM is an automated system that triggers during severe market instability.

Maker has additional controls to stabilize the Dai in case its price goes up or down. If it goes up the system incentivizes users to produce more Dai and bring the price down. If the price drops, MKR holders act as a ready-buy reserve to drive the price up, CDPs are liquefied, and a global settlement is implemented as a last resort. All these features make Maker a well-designed solution to achieving stability. In an ever growing competitive market, only time and  demand will determine if Maker can succeed or a better option will emerge.


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