MakerDAO’s native MKR token is at the center of attention in the crypto world after experiencing a dramatic surge of 55% throughout the month of July. The significant upswing in MKR’s price has spurred interest among investors, leading many to probe into the potential catalysts behind the rally.
What is MakerDAO Crypto?
MakerDAO is a decentralized autonomous organization (DAO) on the Ethereum blockchain, known for its pioneering work in the DeFi (Decentralized Finance) sector. It’s widely recognized for introducing DAI, the first decentralized stablecoin on the Ethereum blockchain.
DAI is an ERC-20 token whose value is pegged to the US Dollar and is maintained through a system of collateral and price feeds. Unlike traditional centralized stablecoins that maintain their peg through reserves held in banks, DAI is backed by collateral in the form of other cryptocurrencies which are locked into MakerDAO’s smart contracts.
The MakerDAO ecosystem also includes the MKR token, which is a governance token. MKR token holders have the right to vote on various aspects of the MakerDAO system, including adjustments to risk parameters, upgrades to the system, and more. Importantly, MKR tokens are also used in the system’s stability mechanism. When the system’s collateral is insufficient, new MKR tokens are minted and sold to cover the deficit, while when the system is overcollateralized, MKR tokens are bought back and burned, effectively rewarding MKR holders.
Rising Yields: Fueling the Momentum
The prime driver attributed to this robust performance appears to be the increasing yields in the DeFi (Decentralized Finance) space, which have been noticeably on the rise in recent times. As the primary governance token for MakerDAO, MKR has seemingly benefited from this upward trajectory. The correlation between rising yields and MKR’s price appreciation signifies the critical role of yield performance in the token’s valuation.
A Closer Look at MakerDAO
MakerDAO is a renowned name within the DeFi ecosystem, primarily known for its DAI stablecoin. It’s an autonomous, decentralized organization running on Ethereum that allows users to lend and borrow cryptocurrency without intermediaries. MakerDAO’s unique structure and the rising popularity of its stablecoin DAI have set the stage for MKR’s appreciation.
MKR: More Than Just a Governance Token
As MakerDAO’s governance token, MKR plays a crucial role in the platform’s operations. Holders of MKR are entitled to vote on critical governance issues, making it an instrumental component in the decision-making process. Furthermore, the MKR token is also used in the system’s stability mechanism, thereby influencing the value of DAI.