How does MakerDAO work?

The borrower sends his crypto currency to a smart contract and in return receives an additional amount in DAI into his wallet by the next block (~15 secs). 

The user retains full ownership of the crypto currency sent which is locked to the smart contract as collateral and can be retrieved at any time by repaying the amount lent in DAI.

An example:

Send 15,000 USD equivalent of ETH to Maker smart contract

Receive up to 10,000 USD worth of DAI in loan instantly

You now have 15,000 USD worth of Ethereum under you custody locked up AND and additional 10,000 USD of DAI in your wallet.

You can do whatever you want with the new 10,000 USD but you have to pay it back plus the stability fee (in DAI or MKR) to unlock the 15,000 USD equivalent of ETH. 

If ETH price goes up you win.

If ETH price falls you need to watch your liquidation price .

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