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2. Intermediate Course

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  1. 1. What is Layer 0 in Blockchain technology?
  2. 2. What is layer 1 in Blockchain?
  3. 3. Second layer (layer 2) - what is it? 
  4. 4. Blockchain and its layers - What is layer three in Blockchain (L3)?
  5. 5. Ethereum 2.0 - What is it? 
  6. 6. Ethereum Proof-of-Stake (PoS) - what should you know?
  7. 7. Ethereum London Hard Fork - what is it ? 
  8. 8. What is the Ethereum Name Service (ENS) and how does it work?
  9. 9. Arbitrum: Ethereum scaling solution - everything you need to know
  10. 10. Polygon 2.0 - the value layer for the Internet
  11. 11. Ethereum ERC-4337 - what is it and how does this standard work?
  12. 12. What is an ERC20 token and how is it created?
  13. 13. The ERC-721X VS ERC-721 Standard – Key Differences!
  14. 14. What is cryptocurrency burning?
  15. 15. Examples of the use of WEB3 on the blockchain
  16. 16. What is Web5? 
  17. 17. Blockchain Oracle - what are oracles? 
  18. 18. Polkadot - Decentralized blockchain and DOT cryptocurrency
  19. 19. Polkadot Parachain - Next-generation blockchain
  20. 20. Interoperability in the world of cryptocurrencies and blockchain
  21. 21. What is Blockchain sharding?
  22. 22. Mainnet versus Testnet on the Blockchain. The complete guide!
  23. 23. MINA Protocol: the lightest blockchain in the world!
  24. 24. Sustainable Blockchain - Proof of Useful Work & Flux
  25. 25. Cosmos SDK: Building the Blockchain Ecosystem
  26. 26. What is cross-chain interoperability in Blockchain technology?
  27. 27. Blockchain trilemma - explanation of the problem. What is the impact on cryptocurrency payments?
  28. 28. Non-fungible tokens and NFT exchanges
  29. 29. How to make money with NFT?
  30. 30. What is the NFT licence fee?
  31. 31. NFT Gas Fee - what is it? How can you reduce your gas fee?
  32. 32. The main differences between static NFT and dynamic NFT
  33. 33. What is minting an NFT?
  34. 34. What are NFT Ordinals? A guide to Bitcoin NFT.
  35. 35. What is KnowOrigin NFT, and how does it work?
  36. 36. ERC-6551 - the new NFT standard. What does it bring to the non-exchangeable token sector?
  37. 37. What is NFT Lending all about? An innovative solution in the world of cryptocurrencies!
  38. 38. The Metaverse – a new virtual world
  39. 39. Metaverse – TOP 15 virtual reality projects
  40. 40. Technical analysis – is it worth using?
  41. 41. Trading order types: stop loss, trailing stop loss, LIMIT
  42. 42. Market Cap versus Fully Diluted Market Cap - the most important differences you should know!
  43. 43. Set up of Stop Loss and Take Profit orders
  44. 44. What are DeFi liquidity pools?
  45. 45. Real Yield in DeFi - what is this trend? What does it consist of?
  46. 46. Vampire Attacks in Decentralized Finance (DeFi): Explanation and Examples
  47. 47. What are wrapped tokens 
  48. 48. What are security tokens?
  49. 49. What are Social Tokens? 
  50. 50. Liquidity Provider Tokens (LPs). What are they, and why are they so important?
  51. 51. What is the Lightning Network, and how does it work?
  52. 52. What is Play-to-Earn (P2E) and how does it work?
  53. 53. Cryptocurrency steps - What is move to earn M2E?
  54. 54. Segregated Witness - what is Segwit Bitcoin all about?
  55. 55. What are Decentralized Cryptocurrency DEX Exchanges?
  56. 56. What is Curve Finance?
  57. 57. What is GameFi and how does it work?
  58. 58. What is Proof of Reserves (PoR)? How does it work?
  59. 59. DAO Investment: A revolution in the world of finance and investment
  60. 60. What is MakerDAO and DAI Stablecoin?
  61. 61. What is the SubDAO protocol, and how does it work?
  62. 62. How to Create Your Own Decentralized Autonomous Organization (DAO)?
  63. 63. Atomic Swap: What is an atomic swap, and how does it work with cryptocurrencies?
  64. 64. What Is Cryptocurrency Vesting? What Are Its Advantages?
  65. 65. What Is the Metaplex Candy Machine Protocol? How Does It Work?
  66. 66. What Is the BNB Greenfield Ecosystem?
  67. 67. What Is Slashing in Cryptocurrencies?
  68. 68. Royalties – What Are They? How Does This Type of Licensing Fee Work?
  69. 69. What is TradFi? The importance for cryptocurrencies!
  70. 70. What is the Real World Asset (RWA) trend in cryptocurrencies? Explanation and examples!
  71. 71. Pyth Network: a powerful oracle harnessing the power of Solana!
  72. 72. What are stables in the world of cryptocurrencies?
  73. 73. What Is Binance Oracle?
  74. 74. Shibarium: A new era in the Shiba Inu ecosystem?
  75. 75. What is an ETF? How will an exchange-traded fund on bitcoin work?
  76. 76. Symmetric and asymmetric encryption - key cryptography techniques!
  77. 77. Hedging in cryptocurrencies - great portfolio protection against risk!
  78. 78. How to create your own cryptocurrency? 
  79. 79. What is a Dusting Attack in cryptocurrencies? How to protect against it?
  80. 80. What is a Black Swan?
Lesson 60 of 80
In Progress

60. What is MakerDAO and DAI Stablecoin?

MakerDAO has gained popularity as a lending protocol based on Ethereum. It offers the ability to borrow cryptocurrencies through a secured stablecoin DAI. In today’s lesson, we will explain what Maker DAO and DAI stablecoin are. 

What is MakerDAO?

MakerDAO is a decentralized lending platform built on the blockchain Ethereum. The protocol uses intelligent Ethereum contracts to automate as well as lend its stablecoin DAI. Smart contracts also provide other functionalities of the protocol, like its management. The protocol is often referred to as decentralized banking based on blockchain. The MakerDAO protocol issues its stablecoin – DAI.

What is stablecoin DAI?

As we mentioned in the paragraph above, DAI is a stablecoin security in the DAO lending protocol. The Marker Foundation was founded in 2014 by Rune Christensen and launched the open – source MakerDAO in the same year. Like most DeFi lending platforms, Maker DAO is based on Ethereum smart contracts.

However, once launched, the MakerDAO protocol was missing a very key element – money. To be more precise – digital money, but not as variable in value as altcoins. And that’s where stablecoins came in.

Stablecoin DAI was launched on the platform in 2017. Its goal was simple – it was to become an unassailable collateral for loans on the platform. By 2022, stablecoin DAI had become the fourth largest stablecoin in terms of market capitalization. It is also the most popular option if we talk about dApps. DAI supports 400 dApps and a similar number of cryptocurrency wallets.

At this point, the question probably occurred to you – why is stablecoin DAI so unique? Because it is backed by many stablecoins and cryptocurrencies. The bulk of DAI’s backing is centralized coins, including stablecoin USD Coin (USDC) and Pax Dollar (USDP). This is followed by Ethereum, Wrapped Bitcoin and dozens of other equally popular cryptocurrencies.

To sum up the dissertation on this interesting stablecoin, we can say that it is an algorithmic stablecoin, centralized and flexible enough to be fully decentralized at the same time.

DAI token – how does it work?

DAI is an ERC-20 token, and can be purchased on major exchanges, i.e. Binance or Coinbase, but also on Uniswap.

Moreover, given that MakerDAO is an open-source protocol on blockchain Ethereum, anyone can issue stablecoins DAI. How. To generate new DAI, users need to borrow them from the MakerDAO vault. This option is available to system users through the Oasis dApp. It is one of hundreds of dApps available on the MakerDAO ecosystem.

Using Oasis, we borrow stablecoin DAI, depositing ETH-based collateral. A intelligent contract (vault) is then created, where DAI is stored as actual escrow. After repaying the loan so taken out, the stablecoin DAI is transferred to the user’s wallet.

Simply put – DAI is created by borrowing assets (minting), and in the portfolio by repaying the loan, i.e. burning.

Interestingly, the platform’s native token MakerDAO, or MKR, is also a stability regulator. All you need to do as an MKR token holder is to use it to establish a DSR – DAI Savings Rate. As a reward for this, MKR holders get interest.

MakerDAO and its functionality

The protocol is interested in that it offers users the option to deposit ETH in intelligent Maker contracts, in exchange for earning in the form of minted DAI tokens.

Next – MakerDAO allows depositors to earn interest on DAI they hold in a DAO “bank”. DAI tokens are locked into a DAI Savings Rate (DSR) contract.

DAI stablecoins are accumulated based on the DSR interest rate.

By blocking ETH, WBTC, Link, MATIC or MANA as collateral, one will receive a higher interest rate loan in DAI tokens.

Token MKR

MKR is also a token of ERC-20. At the same time, it is a function of the native token of the MakerDAO protocol. MKR is also a recapitalization source for the MakerDAO protocol. To encourage users to have this native token, MKR users have the privilege of taking part in the management aspects of the protocol.

What can such users do? Add new types of collateral, regulate intelligent contracts or adjust risk according to protocol (including talk of debt ceilings, liquidation ratios or stability and savings rates).

Decommissioning process in the MakerDAO protocol

The managers in the protocol are users who hold a sufficient number of MKR tokens. The holders of MKR have developed an interesting strategy for overseeing the liquidation risk that arises from the volatility of collateral. If the collateral deposited by users, cannot cover the debt, they are liquidated automatically, thanks to arbitrageurs. The funds raised through the liquidation process are used to pay off the debt and the penalty that comes with such liquidation.

If such a process does not generate enough DAI and is unable to cover the debt, it is then transferred to the Maker Buffer. This is the pool that contains the fees generated for the withdrawal of collateral in addition to the liquidation proceeds. Interestingly, if the amount of DAI in the Maker Buffer is not sufficient, then a debt auction will be initiated, and the protocol itself will mint MKR tokens. It will then sell them to the referents to obtain DAI and recapitalize the system.

MakerDAO and the risks

The main threat to the protocol is the risk posed to it by the semi-decentralized security types accepted within its vaults. When MakerDAO debuted in 2017, it allowed only ETH to be used as a backup asset for DAI.

At this point, we are seeing considerable changes. More than half of DAI is backed by centralized stablecoins. As a result, DAI dependent on centralized stablecoins exposes the protocol to regulatory risk.

Another risk for MakerDAO are the oracles on which it depends. MakerDAO uses them to provide up-to-date asset prices for its intelligent contracts. Oracles, however, are susceptible to price deviations. Consequently, unreliable oracle services can have disastrous consequences for loan holders in MakerDAO. Because of inaccurate price information, they can be held up.


The MakerDAO protocol and stablecoin DAI are fascinating topics. The MakerDAO protocol would not exist without the security of stablecoin DAI. However, as is sometimes the case with decentralized lending applications – everything is ahead of them. MakerDAO is a relatively young protocol that is sure to surprise us with its development in the coming years.