MakerDAO was founded by Rune Christensen in 2015 and launched the Maker Protocol on Ethereum in December 2017 — making it one of the first and most consequential DeFi applications. The core innovation: a system for generating DAI, a decentralised stablecoin softly pegged to $1, backed not by centralised reserves (like USDT or USDC) but by over-collateralised crypto assets locked in Maker's smart contracts. At its most fundamental: lock ETH in a Maker Vault, generate DAI against it (at, say, 150% minimum collateralisation ratio), use the DAI for anything, and eventually pay back the DAI plus a stability fee (interest) to unlock the ETH. The process creates DAI supply endogenously — new DAI is minted when users want liquidity against their crypto assets, and destroyed when they repay. This mechanism has maintained DAI's peg to $1 through multiple dramatic crypto market cycles, establishing Maker as the "gold standard" for decentralised stablecoin design.
The CDP Model: How DAI is Created and Maintained
A Collateralised Debt Position (now called a "Vault") is the mechanism for DAI creation. The collateralisation ratio enforces over-collateralisation: if ETH is at $3,000 and the minimum collateralisation ratio is 150%, you can generate a maximum of $2,000 DAI by locking $3,000 of ETH. If ETH's price falls and the ratio drops below 150%, liquidation is triggered: a keeper (an automated bot) pays off your debt, receives your ETH collateral at a discount (as a liquidation penalty for the vault owner), and the system's bad debt is thus cleared. The stability fee (interest rate on DAI loans) and liquidation ratio are governance parameters — MKR holders vote to set them for each collateral type. The DAI Savings Rate (DSR) is a separate mechanism: users can lock DAI in the DSR contract and earn the current DSR interest rate, funded by stability fees. The DSR creates a demand mechanism for DAI: by raising the DSR, Maker can attract DAI into the savings contract, reducing circulating supply and supporting the peg during downward pressure.
RWA Collateral: MakerDAO's Controversial Expansion
A significant evolution in Maker's collateral base since 2022: the inclusion of Real World Assets (RWA) — tokenised US Treasury bills, corporate loans, and real estate — as collateral for DAI minting. RWA collateral generates higher stability fees than volatile crypto collateral (because US T-bills earn 4–5% yield, which flows into Maker's revenues), dramatically increasing the protocol's income. However, RWA inclusion fundamentally changes DAI's decentralisation properties: a portion of DAI is now backed by assets held by centralised custodians (banks, fund managers), reintroducing counterparty risk and regulatory exposure. Maker governance has debated this trade-off extensively — purists argue it defeats the purpose of a decentralised stablecoin; pragmatists argue the revenue sustainability it provides is essential for long-term operation. The RWA expansion is the largest single factor in Maker's revenue growth in 2022–2026.
The Sky Endgame Rebrand
In 2024, Rune Christensen's "Endgame" governance proposal began implementation: MakerDAO rebranded to Sky Protocol, with DAI rebranded to USDS and MKR convertible to SKY tokens (at a 1:24,000 ratio). The rebrand is controversial: long-term MKR holders generally view it as unnecessary disruption; the supporting argument is that a fresh brand with new token architecture enables governance structure improvements and new product development. Practically, MKR and DAI continue to function independently of the SKY/USDS rebrand — there is no forced conversion, and Maker's core protocol mechanisms are unchanged. New products launched under the Sky brand (Spark Protocol — an Aave V3 fork integrated with Maker/Sky) have performed well.
MKR as an Investment
MKR is one of the most straightforward DeFi investment cases: a governance token with a direct buyback mechanism. Protocol surplus revenue (stability fees minus DSR payouts and expenses) is used to buy and burn MKR — reducing supply and creating deflationary pressure proportional to protocol profitability. At peak RWA revenue (2023–2024), Maker was burning millions of dollars of MKR per week. MKR holders benefit from: supply burn from protocol profitability, governance rights over a $5B+ stablecoin system, and the stability of a protocol that has operated through multiple complete market cycles without a systemic failure. The risks: DAI's centralisation trend (RWA collateral), regulatory exposure (US Treasury collateral makes Maker more susceptible to stablecoin regulation), and the execution risk of the Sky Endgame transition.
MakerDAO's Real-World Asset Strategy and Sky
MakerDAO pioneered the integration of real-world assets (RWA) as DAI collateral — US Treasury bonds, corporate loans, and institutional receivables now back a significant portion of DAI supply through structured lending facilities with real-world counterparties. This RWA strategy transformed MakerDAO from a pure crypto-native CDP protocol into a hybrid institution managing both on-chain crypto collateral and traditional financial assets, significantly diversifying DAI's backing and generating substantial protocol revenue from Treasury yields flowing through the DSR (DAI Savings Rate).
The Sky rebranding (transitioning MKR to SKY tokens and DAI to USDS) represents the protocol's evolution toward a modular governance structure with SubDAOs managing specific protocol functions independently. MKR token holders can convert to SKY at a fixed ratio, with MKR retaining governance rights during the transition. The Spark Protocol (MakerDAO's lending market) provides direct DAI/USDS borrowing and yield opportunities without third-party intermediaries. MKR trades on Coinbase, Binance, Kraken, and Bybit. Our DeFi governance guide covers MakerDAO's model. Use our crypto tools for MKR analysis and our DennTech blog for MakerDAO news.
MakerDAO's Endgame plan introduces Atlas (the immutable governance rulebook encoded on-chain) as a safeguard against governance drift and attack — by committing core governance principles to an unchangeable on-chain document, Maker reduces the risk of governance capture that has affected other DeFi protocols. The SubDAO structure (Spark, Aligned Governance Facilitators) distributes operational responsibilities across specialized teams while maintaining unified protocol-level governance, creating a scalable organizational model for one of DeFi's most critical infrastructure protocols. This structural evolution from monolithic DAO to modular SubDAO system represents a significant governance innovation that other large DeFi protocols may adopt as they scale.
MKR token holders who participate in Maker governance voting receive enhanced staking yields relative to passive holders, directly incentivizing active governance participation and maintaining a well-informed voting electorate for protocol decisions.