Bitpie “DeFi Star ” — #2 MakerDAO
MakerDAO is an ETH DApp that allow users to collateralize their ETH to borrow DAI Token from the system. It is the most popular DApp on ETH blockchain.
Before the collateralization, user should create a CDP（Collateralized Debt Position） first, and it takes a little bit GAS. After the CDP was established, users can start collateralization. The lowest collateralization ratio that the system allows users to use it 150%, which means if I have 150 ETH, then the maximum value of DAI I can borrow is 100 ETH.
Therefore, users can leverage their profits via MakerDAO.
Alice is bullish on ETH; she collateralizes 15 ETH at the price of 300 USD and borrows15*300/150%=3,000 DAI. Alice converts 3,000 DAI to 10 ETH and hold. After 1 month, the price of ETH hits 450 USD. Now the 10 ETH equals to 4,500 USD. Alice repays the 3,000 USD DAI and the stability fee, which equals to 3,000*20.5%/12=51.25 USD. Alice gets a profit of 1448.75 USD.
As long as the value of ETH is higher than 150% of DAI, the CDP will not be liquidated. If the value approaches to 150%, users can add more ETH in the CDP or repay some DAI. When the value of ETH plunge and is less than 150%, then the CDP will automatically sell your ETH and repurchase DAI from the market. It will also deduct 13% of your ETH as penalty.
Degree of Decentralization
High degree of decentralization. The whole process of borrowing is realized through smart contract. The developers are not able to touch users’ crypto assets.
Similar to many decentralized protocols, MakerDao provides a tremendous liquidity. Borrowers are able to easily trade DAI.
Financing and Market Cap
MakerDao is one of the most popular projects in the area of the cryptocurrency venture capital. It should be mentioned that Andreesen Horowitz invested USD $15 million early this year and bought 6% of the MKR token. So far, the DAI circulation is USD $80 million.
The largest value of Maker is, in a volatile market, which is much dependable to fiat-custodial stable coins, MakerDao provides a intrinsic, permissionless, public and transparent stable coin as an alternative and financial tool.
In the decentralized applications, the “Tokens” (ERC20) are fungible and swappable with each other on-chain. However, the “Coins” like BTC and ETH are not “Tokens”, so they are not swappable on-chain with each other. Given that, we have seen the creation of the two-way backed tokens like WETH and WBTC so as to swap with other tokens.
PETH is short for ‘Pooled Ether’. You can get it when you collateralize your ETH into MakerDAO. Please notice that the price of PETH is not 100% equals to ETH.
PETH = WETH * (Total PETH supply) / (WETH balance)
Now the ratio for PETH and ETH is 1.04 and this number will increase in the future as part of PETH is burned because of the liquidation.
Simply put, the ratio changes of PETH/ETH offer the early adopters with profits. The PETH is designed to encourage investors to deposit ETH into the system and provide liquidity to the system.
A decentralized USD stable currency produced by MakerDAO, the price 1:1 pegged to US dollar. DAI token is widely used in ETH DeFi product. Such as MakerDAO, Compound, Kyber Dex etc.
The MFIRT appointed by the Maker Foundation is responsible for communicating with the community and organizing proposals. After the proposal is released, it is decided by the MKR holders through voting (for example, the stability rate has increased from the annualized 17.5% to 20.5%).
How to use MakerDAO on Bitpie Wallet
Open your Bitpie wallet, click “Discover” to enter the DApp page.
For both iOS and Android phone, please paste the link below into the search box.
This is the place to generate Dai! Use this dapp from the Maker team to manage depositing of collateral and generation…
After entering, click Connect to connect to the Bitpie wallet.
Step 4. Create a CDP
Enter the ETH amount you want to collateralize and the DAI amount you want to borrow.
Here I input 0.01 ETHs, which was about $2.11 at the price. Because the minimum pledge of DAI is 150%, so the amount I can borrow is 2.11/1.5=1.407.
Once the payment is complete, your account will receive the DAI.
Step 6. Repay DAI and redeem ETH
At the time of repayment, it is necessary not only to repay the principal of the borrowed DAI, but also to pay the stability fee(interests). In the past, MakerDao only accepted MKR to be paid as the stability fee, now users can choose to use MKR or DAI to repay the stability fee.