In a context of distrust of decentralized exchanges, the MakerDAO story can inspire us. The one that is today the first DeFi platform will have notably democratized the DAO (Decentralized Autonomous Organization) concept. MakerDAO defends a certain vision of blockchain and cryptocurrencies, with decentralization at the heart of its doctrine. A salutary principle in the face of the excesses of centralized actors?
What is a DAO?
A DAO is a decentralized organization that use the smart contracts for its management. It offers users greater security and flexibility than financial services traditional. In particular, a DAO allows users to lend and borrow digital assets at variable interest rates: this is called Challenge (for “decentralized finance”). In general, a DAO will also provide DApps (decentralized applications). To summarize, a DAO meets the following characteristics:
- Give yourself a mission ;
- Gather a community ;
- Acquires a cash flow and an economic model ;
- Creates a governance mechanism ;
- Distribute ownership.
In other words, a DAO can be seen as a kind of association, but which uses blockchain and cryptocurrencies as a means of governance. This technological interface is supposed to guarantee more durability and security to the entity. Concretely, there could be DAOs of all kinds. However, when we talk about DAO today, it mainly refers to communities related to DeFi and cryptos in general. “The code is law” could be their motto.
MakerDAO, one of the first players in DeFi and decentralization
MakerDAO is one of the oldest and most successful DAOs. Developed in 2015, MakerDAO is one of the first projects to truly use blockchain technology to create a decentralized platform. Pioneers, precursors, adventurers: so many qualifiers that suit MakerDAO developers. Indeed, if decentralized finance is relatively (re)known today, in 2015, it was far from being the case. It was a brand new idea that many thought was even impossible to achieve. And yet, they did.
This is particularly under the aegis of Christensen Rune that the first form of DAO was built. Passionate about technology and finance, Rune also has a certain flair. He started investing in bitcoin very early, almost from its inception. But Christensen’s favorite thing about bitcoin is its technology, and more importantly, its potential. While he is just a student at the University of Copenhagen, he spends hours in the evening going through technical documents about cryptocurrencies. Quickly, an obsession came to him: to create something new and even more innovative than bitcoin and cryptocurrency. He wants to use bitcoin as a starting point for a finance project without a trusted third party.
It is in this context that Rune launched MakerDAO in 2015, with a simple mission: to create financial solutions that are decentralized, open and accessible to everyone. Thus, DeFI is quickly becoming essential for cryptos. Today, the main innovations come from it, always at the forefront of the ecosystem. MakerDAO is now the biggest platform in this sector.
Behind the first truly decentralized stablecoin
The great innovation of Maker DAO is undoubtedly the DAI. This crypto stable was the first of its kind to be fully decentralized. Unlike USDT or even BUSD which are stablecoins guaranteed by very centralized companies. Additionally, the DAI allows MakerDAO to maintain its stability. Indeed, MakerDAO users can borrow and lend digital assets using DAI as collateral. At the origin of the DAI, there is in particular Nikolai Mushegian, now deceased. The young developer will also have contributed a lot to the protocol.
Due to the decentralized nature of MakerDAO, no outside entity has power over the platform. This means that this automated system is free from conflict of interest that can harm users (FTX might be telling you something). Additionally, the Ethereum blockchain that MakerDAO is built on allows users to access decentralized financial services unique. The founders of the DAO thus remain as committed to decentralization as ever, going so far as to propose dissolving the foundation at the origin of the project, deemed to be still too “centralised”. But this radical approach may be the cure for it. Because in a context of distrust vis-à-vis the big exchangesa fair return to basics is undoubtedly beneficial.
MakerDAO invents a new form of governance
Since 2015, the platform has served as a model for many other DAO projects that have emerged in recent years. Today, MakerDAO continues to grow and improve its services for users. The platform recently launched a new version called Maker 2.0which includes additional features such as more flexible loan and deposit options, higher liquidity and more competitive interest rates.
Each DAO is likely to configure its rules differently. Additionally DAOs can be used to automate business processes complex such as contracts, transactions and customer relationships. This can allow companies to reduce costs and gain efficiency. By skilfully using the smart contracts, a new way of doing business is possible.
One could also imagine frankly political governance via these decentralized tools. votes on chain would then be possible in order to sweep away the recurring doubts around suspicions of fraud. Finally, DAOs could also have a role to play in the potential tokenization of the economy. For the CEO of BlackRock, it is the future of the world economy.
Over the years, MakerDAO has become the most popular and widely used CAD model. MakerDAO offers a nice overview of the financial solutions that the blockchain makes possible. Who knows ? maybe in a few years, DAOs will be commonplace and the few pioneers who laid the groundwork for this new system of governance will be remembered.
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