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The creator of MKR.tools, Mike McDonald, launched a celebratory alert on Twitter yesterday morning. According to Ethereum's blockchain, about 1 million ether – or almost 1% of the total supply of Ethereum – is currently blocked in the smart contracts of MakerDAO.
There is now 1,000,000 of ETH blocked @MakerDAO smart contracts this morning 🎉. A slight rounding error from 1% of the total ETH supply. pic.twitter.com/0ePQv6mWKm
– Mike McDonald (@mikeraymcdonald) November 13, 2018
MakerDAO is the project behind Dai, a second-generation stablecoin offering that very carefully enables the issuance of the US dollar on the Ethereum blockchain. Mechanics may seem complex, but Maker offers a useful "beginner" explanation that does not require you to be an expert economist or developer of Ethereum to grasp. The author Gregory DiPrisco explains the difference between Dai and, for example, Tether:
"You're probably familiar with the stablecoins that hold USD in bank accounts and issue blockchain tokens that are" supported "by these dollars. IOU coinbecause if those bank accounts should ever be frozen or if the accountants have defrauded token holders, the stablecoin now becomes an IOU on what is left when they eventually get the bank accounts back (Self they never regain bank accounts). Relying on the legal system to keep cryptographic tokens puts an unreliable intruder into the blockchain. "
Not all this ether is contributing to Dai's market capitalization
Although the blockchain shows around 1 million Eths blocked in the smart contracts of Maker, the market capitalization of the Dai token is actually about 1/3 of that figure, at the time of writing about 357,000 ETH / $ 72 + million.
The way the Maker system works is that users group together the ether (referred to as PETH) and are emitted from tokens that are secured by deposited ether and, through various mechanisms, they are stabilized at $ 1. A term frequently used in these discussions is "WETH", which is the abbreviation of "Ether wrapped". WETH is more of a concept than a product of MakerDAO – PETH and Dai are tokens issued by Maker respectively.
A total of 967,507.91 ETH was blocked in the Primary Maker contract, PETH, at the time of writing.
A total of more than 103 million ETHs were generated after the financing of the smart contract platform and the subsequent launch on 30 July 2015. This figure includes the first 72 million coins issued as part of the funding mechanism Ethereum crowdsale or ICO had place the year before.
Which means that MakerDAO, which launched the PETH token and related products towards the end of last year, currently accounts for almost the entire percent of the existing ether. While some believe that Dai's practical applications are limited, he is taking a radical approach to a complex problem, with results that have not been excessively disappointing. It has integrated mechanisms to liquidate positions that could destabilize the system in general:
"[…] the possibility remains that the incentive structures will not function as expected – especially when the price of ETH continues to decline and its value is worth less than the amount of Dai it is supposed to support. […] In this situation [undercollateralization], the Maker system activates a settlement of the CDP guarantee, selling it automatically to the highest bidders for Dai as quickly as possible recapitalize and make sure that the Dai that has released to the original user is completely guaranteed ".
It also has a massive amount of Silicon Valley venture capital dollars, after Andreessen Horowitz's new crypt fund (a16z), initially capitalized at $ 300 million, went into Maker for $ 15 million last month.
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