The History of MKR (MakerDAO)

MKR is the governance token for MakerDAO, a decentralized autonomous organization that was initially created to support the decentralized stablecoin, DAI. The history of MKR is intimately tied with the rise of decentralized finance (DeFi) and the evolution of the Ethereum blockchain. MKR serves a governance and utility role, allowing holders to vote on various proposals related to the Maker Protocol and ensuring the stability of DAI. Let’s take a closer look at the key milestones in the history of MKR and MakerDAO.

2014: Beginnings of MakerDAO

The foundation of MakerDAO traces back to 2014 when Danish entrepreneur Rune Christensen began exploring the concept of decentralized finance. Christensen was interested in creating a decentralized stablecoin that would not be subject to the fluctuations typically seen with cryptocurrencies. His idea was to peg this future stablecoin to real-world assets, such as the U.S. dollar, but to ensure that the entire system was trustless, decentralized, and governed by its stakeholders. This would form the basis for both MKR and DAI.

2017: Introduction of MKR and DAI

The MakerDAO platform was officially launched in 2017 on the Ethereum blockchain. The first version of the system introduced the stablecoin known as Single-Collateral DAI (SCD), which would later be renamed to Sai. Users could lock ETH (Ethereum) into smart contracts and mint Sai in return. The MKR token was created alongside the stablecoin as a governance and utility token.

MKR plays a critical role in ensuring the stability of the system. MKR holders have the right to vote on important decisions for the Maker Protocol, such as interest rates and risk parameters. Additionally, MKR tokens are created or burned depending on the collateralization of the system. If the system is undercollateralized (i.e., the collateral doesn’t fully match the outstanding loans), more MKR is minted and sold to cover losses. This feature was developed to align incentives for MKR holders to keep the system robust and avoid over-leveraging.

2019: Transition to Multi-Collateral DAI

In 2019, a major upgrade to the Maker protocol was launched, known as Multi-Collateral DAI (MCD). This version allowed users to lock up multiple types of crypto assets—such as BAT (Basic Attention Token) and USDC (USD Coin)—to mint the newly branded DAI, as opposed to the earlier version which only supported ETH. This expanded the flexibility and utility of the Maker ecosystem.

With this upgrade, Sai (Single-Collateral DAI) was gradually phased out, and DAI became the flagship stablecoin of the system. MKR retained its governance role, with token holders voting on which collateral assets were eligible to mint DAI and adjusting system risk parameters. MCD also introduced the "DAI Savings Rate," enabling users to earn interest on their DAI holdings, with MKR holders responsible for adjusting the rate in response to market conditions.

Governance and Controversy

MKR's governance model, while innovative, has not been without challenges. Questions around centralization of voting power among a few large MKR holders have been raised regularly, leading to debates within the DeFi community about whether the system truly operates in a distributed manner. There have also been moments when the system came under significant stress, most notably during periods of volatility in the larger crypto market when liquidation events put pressure on the protocol’s stability mechanisms.

Ongoing Development

The history of MKR and MakerDAO is one of continual innovation. MakerDAO continues to explore new use cases and evolving governance models. While the core function of MKR has largely remained unchanged since its launch, its role in driving the governance of the system has expanded with every new protocol development and community vote.