What is MKR used for?

The MKR token has two main uses cases: governance and securing the protocol. MKR holders govern the future direction of the platform through community voting on various parameters such as the stability fee, debt ceiling, types of collateral to be used, and more. Second, MKR tokens act as the backstop for debt shortfalls, or when loans become undercollateralized during extreme market conditions. In the scenario when the collateral price drops sharply or no one wants to buy the collateral, bad debt may accrue in liquidated vaults that cannot be repaid through a typical collateral auction (winning bidder pays DAI for collateral from a liquidated vault). Instead, the bad debt must be addressed by the system through minting of new MKR tokens in exchange for DAI. This increases the amount of MKR in circulation and comes at the expense of current token holders as their value is diluted.

MKR tokenomics

MKR launched with an initial supply of 1M tokens. MKR has distributed these tokens to the founders and early adopters through three private sales. Supply will expand and contract through its burn and mint model based on surplus fees and debt shortfalls.

How does MKR accrue value?

Maker currently does not have a direct revenue accrual mechanism. Instead, MKR token holders indirectly benefit from surplus fees generated from stability fees collected from vaults. Surplus DAI accrued from stability fees are auctioned off for MKR tokens, which are then subsequently burnt to reduce the circulating supply and increase token scarcity.