MakerDAO is an “Decentralized Autonomous Organization” [DAO] which operates on the ethereum blockchain. A DAO is similar to a traditional open source project but with the addition of ‘tokens’ that are distributed to reward supporters/contributors. A token is nothing more than a digital asset that exists on the infrastructure of the blockchain. MakerDAO made its initial distribution of tokens, “Makercoin” [MKR], in 2015.

1. What​ ​is​ ​MakerDAO?
MakerDAO​ ​is​ ​an​ ​“Decentralized​ ​Autonomous​ ​Organization”​ ​[DAO]​ ​which​ ​operates​ ​on​ ​the
ethereum​ ​blockchain.​ ​A​ ​DAO​ ​is​ ​similar​ ​to​ ​a​ ​traditional​ ​open​ ​source​ ​project​ ​but​ ​with​ ​the​ ​addition
of​ ​‘tokens’​ ​that​ ​are​ ​distributed​ ​to​ ​reward​ ​supporters/contributors.​ ​A​ ​token​ ​is​ ​nothing​ ​more​ ​than​ ​a
digital​ ​asset​ ​that​ ​exists​ ​on​ ​the​ ​infrastructure​ ​of​ ​the​ ​blockchain.​ ​MakerDAO​ ​made​ ​its​ ​initial
distribution​ ​of​ ​tokens,​ ​“Makercoin”​ ​[MKR],​ ​in​ ​2015.
The​ ​purpose​ ​of​ ​the​ ​MakerDAO​ ​project​ ​is​ ​to​ ​create​ ​a​ ​‘stable​ ​coin’​ ​on​ ​the​ ​ethereum​ ​blockchain.
The​ ​name​ ​of​ ​the​ ​first​ ​iteration​ ​of​ ​this​ ​stable​ ​coin​ ​is​ ​Sai.​ ​A​ ​stable​ ​coin​ ​is​ ​a​ ​token​ ​[​see​ ​paragraph
1​]​ ​that​ ​seeks​ ​to​ ​eliminate​ ​price​ ​volatility,​ ​effectively​ ​tracking​ ​the​ ​price​ ​of​ ​a​ ​fiat​ ​currency​ ​like​ ​the
US​ ​dollar.​ ​For​ ​instance,​ ​should​ ​the​ ​MakerDAO​ ​project​ ​choose​ ​to​ ​use​ ​the​ ​US​ ​dollar​ ​as​ ​the
guideline​ ​for​ ​Sai,​ ​each​ ​1​ ​Sai​ ​should​ ​be​ ​created​ ​or​ ​redeemed​ ​for​ ​roughly​ ​1​ ​dollar.
MakerDAO​ ​accomplishes​ ​this​ ​by​ ​creating​ ​a​ ​suite​ ​of​ ​‘smart​ ​contracts’--software​ ​that​ ​runs​ ​on​ ​the
ethereum​ ​blockchain--that​ ​anyone​ ​can​ ​use.​ ​These​ ​smart​ ​contracts​ ​let​ ​users​ ​deposit
collateral--e.g.,​ ​ether​ ​(ETH)--and​ ​in​ ​turn,​ ​create​ ​Sai.​ ​The​ ​smart​ ​contracts​ ​ensure​ ​that​ ​the
collateral​ ​always​ ​exceeds​ ​a​ ​certain​ ​threshold​ ​to​ ​maintain​ ​the​ ​integrity​ ​of​ ​the​ ​stable​ ​token.
Should​ ​the​ ​value​ ​of​ ​the​ ​collateral​ ​fall​ ​below​ ​the​ ​predetermined​ ​threshold,​ ​it​ ​is​ ​auctioned​ ​off
automatically​ ​through​ ​the​ ​smart​ ​contracts​ ​to​ ​the​ ​highest​ ​bidder.​ ​MakerDAO​ ​itself​ ​never​ ​has
custody​ ​of​ ​any​ ​collateral​ ​or​ ​Sai,​ ​it​ ​simply​ ​creates​ ​the​ ​smart​ ​contracts​ ​which​ ​allow​ ​the​ ​blockchain
to​ ​custody​ ​the​ ​collateral​ ​and​ ​the​ ​user​ ​to​ ​custody​ ​the​ ​Sai.
As​ ​a​ ​DAO,​ ​MKR​ ​holders​ ​have​ ​governance​ ​rights​ ​over​ ​the​ ​business​ ​logic​ ​parameters​ ​of​ ​the
smart​ ​contract​ ​system.​ ​MKR​ ​holders​ ​exercise​ ​their​ ​governance​ ​rights​ ​by​ ​voting​ ​with​ ​a​ ​smart
contract​ ​called​ ​ds-chief.​ ​Ds-chief​ ​voting​ ​elects​ ​a​ ​“top”​ ​proposal​ ​smart​ ​contract​ ​with​ ​a​ ​continuous
“approval​ ​voting” ​ ​methodology.​ ​Anyone​ ​can​ ​submit​ ​a​ ​proposal​ ​smart​ ​contract​ ​that​ ​is​ ​eligible​ ​to1
be​ ​voted​ ​as​ ​the​ ​top​ ​proposal.​ ​The​ ​proposal​ ​smart​ ​contract​ ​that​ ​has​ ​the​ ​highest​ ​number​ ​of​ ​votes,
becomes​ ​the​ ​top​ ​proposal,​ ​and​ ​can​ ​trigger​ ​alterations​ ​to​ ​business​ ​logic​ ​parameters​ ​according​ ​to
its​ ​proposal​ ​terms.​ ​Since​ ​voting​ ​is​ ​continuous,​ ​this​ ​can​ ​happen​ ​at​ ​any​ ​time,​ ​but​ ​the​ ​alterations
do​ ​not​ ​go​ ​into​ ​effect​ ​immediately,​ ​only​ ​after​ ​a​ ​security​ ​delay.​ ​This​ ​ensures​ ​that​ ​in​ ​the​ ​event​ ​of
malicious​ ​voting​ ​the​ ​community​ ​can​ ​react​ ​in​ ​time​ ​to​ ​prevent​ ​the​ ​malicious​ ​changes​ ​from​ ​taking
effect.
1
​ ​​https://en.wikipedia.org/wiki/Approval_voting