This report shares about MakerDAO and its token economics mechanism model.
MakerDAO is a 2-token ecosystem built on Ethereum. There is DAI, a stable coin pegged to USD, and MKR, a governance token to govern how DAI is managed. MakerDAO is backed by collateral using a smart contract, CDP.
As a decentralized ecosystem, the rules of the ecosystem, as well as the automated and non-automated mechanisms, have to be clearly defined. This paper will share how MakerDAO has designed the economics of the token ecosystem and how it ensures the robustness amongst the decentralised participants.
Section 1 is a high-level introduction to MakerDAO and what its objectives and use-cases are in the decentralised finance (DeFi) industry. Section 2 recaps what mechanism design is, and what the factors are. Section 3, 4 and 5 will go in-depth on how MakerDAO designs its token economics according to the 3 sections of mechanism design: governance,non-financial incentives and structure. Section 6 concludes this report.