Explained: What is MakerDAO? How Does It Work?

MakerDAO is a decentralized, open-source project that operates on the Ethereum blockchain and serves as a foundation for a next-gen financial system based on blockchain technology. It is one of the most popular DeFi applications and provides cryptocurrency lending and borrowing services based on smart contracts. The project operates through a DAO, which is managed by global MKR token holders who use their voting power to make decisions about the Maker ecosystem, such as stability fees and collateral types.

The main attraction of MakerDAO is its use of Dai, a stablecoin that provides stability against the extreme volatility of cryptocurrencies. By borrowing Dai instead of buying it, investors can access a US dollar-pegged stablecoin without having to sell any ETH, making it a popular choice for yield farming and lending platforms.

MakerDAO also offers several benefits to its users, such as earning interest on DAI held in the DAO's bank, using cryptocurrencies as collateral to obtain low-interest loans in Dai tokens, and locking ETH deposits to earn newly minted Dai tokens.

In conclusion, MakerDAO is a decentralized financial platform that provides a stable and secure environment for lending and borrowing cryptocurrencies, offering users a variety of features and benefits to make their crypto investment experience smoother.

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