On Tuesday, Mike McDonald, the creator of MKR.tools, an interactive dashboard to track CDPs and the overall system, published an interesting post on his Twitter. He showed that almost 1 percent of the total supply (or 1 million Ethereum) is currently locked in MakerDAO smart contracts.
There is now 1,000,000 ETH locked in smart contracts as of this morning 🎉. A slight rounding error away from 1% of the total ETH supply.
— Mike McDonald (@mikeraymcdonald)
Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. Since its launch in 2015, a total of just over 103 million Ethereum have been generated. This amount includes the initial 72 million coins issued as a part of the Ethereum ICO funding conducted the year before.
As the Ethereum blockchain shows, about 1 million Ethereum is locked up in Maker smart contracts, but the DAI token’s market capitalization is actually around 1/3rd of that figure.
About MakerDAO
MakerDAO is the project behind Dai, a stablecoin offering that automatically reacts to changing market conditions in order to stabilize its value against the major world currencies. It is a crypto-collateralized stablecoin pegged to the USD but entirely backed by Ethereum. MakerDAO leverages smart contracts where the stablecoin Dai is pegged to the USD 1:1 and functions as a decentralized autonomous organization.
The system of MakerDAO is not sophisticated, users are not required to be expert economists or Ethereum developers to grasp the mechanism. Its creator, Gregory DiPrisco, explains the difference between Dai and, for instance, Tether:
“You’re most likely familiar with stablecoins that hold USD in bank accounts and issue tokens on a blockchain that are ‘backed’ by these dollars. I call this legally-backed crypto, or an IOU coin, because if those bank accounts should ever be frozen or if the accountants defrauded token holders, the stablecoin now becomes an IOU on whatever’s left when they eventually get the bank accounts back (if they ever regain the bank accounts). Relying on the legal system to maintain crypto-tokens inserts an unreliable middle-man into the blockchain.”
MakerDao heavily relies on complex and novel technology. The way the Maker system works is as follows: users pool Ethereum (referred to as PETH) together and get Dai tokens collateralized by the deposited Ethereum and stabilized at $1. Another term widely used among users is WETH — “wrapped Ethereum”. WETH is more of a concept than a product of the MakerDAO – PETH and Dai are respectively tokens issued by Maker.
It is notable that the project has been supported by such a prominent figure as Andreessen Horowitz who a total of $15 million to MakerDAO. According to Rune Christensen, CEO and co-founder of MakerDAO, thanks to funds received from Horowitz and operational support from his a16z crypto fund, the project will get a chance to boost the development, evolution and adoption of the Dai Credit System.
