Maker

CDP

Maker is a top decentralized lending protocol that lets anyone mint or redeem the DAI stablecoin by depositing crypto and tokenized assets as collateral.

Risk Rating
Good
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Maker is one of the safest borrowing protocols that enables loans paid out in its own DAI stablecoin, which is overcollateralized by strong crypto assets.
What we like less
The DAI stablecoin is ~30% backed by USDC, a centralized stablecoin. This exposes DAI to underlying the risks related to Circle, a licensed custodian who holds the underlying USD reserves.
What it means for you
Offers you a great way to borrow one of the premier decentralized stablecoins and put it to use to earn yield for you across DeFi.
Information
Exploit/Hacks
None
Info
Key Metrics
  • TVL: $6.1B (Rank #2)
  • TVL Ranking by CDP: #1
  • Blockchain: Ethereum
  • Chain TVL
    • Ethereum: $6.15B
Risk Assessment
Good
Protocol Code Quality
  • Code reviewed by several experienced auditors including Trail of Bits and PeckShield
  • Public team promotes accountability
  • No documented protocol hacks since launch
  • Robust controls to mitigate oracle price manipulation
Protocol Maturity
  • Core protocol launched in 2017; maturity over 2 years minimizes technical risk as smart contracts are amongst the most battle-tested
  • Top 1% by total value locked reduces risk
  • Decentralized governance increases transparency
  • Low voting power concentration reduces risk
Protocol Design
  • No concerns identified
  • Cross-collateral markets are exposed to systemic risks as each asset creates incremental risks for the platform as a whole
  • Maker is one of the oldest DeFi protocols and its DAI stablecoin has survived countless tests of market volatility
Things to know about Maker

How Maker works

Maker is a decentralized borrowing protocol that allows borrowers to draw loans against crypto assets like ETH as collateral. Loans are paid out in DAI, a USD pegged stablecoin with a collateralization ratio of at least 120%. The DAI peg is further supported by the Peg Stability Module (PSM). The PSM is a decentralized exchange that allows users to swap USD stablecoins for DAI at a 1:1 rate.

How Maker makes money

Maker collects a stability fee on all DAI generated through its smart contracts. The stability fee is a variable-rate fee that continuously accrues to the generated DAI by a user (must be paid in DAI). Part of the stability fee is set aside to sustain the protocol's operations including the Dai Savings Rate (DSR), risk teams, and other protocol costs. All surplus DAI collected from platform revenue including liquidation fees are deposited into the Maker Buffer. When the amount of DAI reaches a certain level, those funds are placed in a surplus auction whereby Maker uses the DAI to buy MKR governance tokens and burn them to reduce the circulating supply.

How you make money on Maker

You can deposit crypto assets into the Maker vaults to mint DAI to be used across DeFi for lending and market making. The Oasis front-end app also offers a feature that allows you to earn Uniswap V3 higher trading fees with DAI through recursive leverage.