MakerDAO: What It Is, How It Works, and Why It Matters in DeFi

When you hear MakerDAO, a decentralized autonomous organization that manages the DAI stablecoin on the Ethereum blockchain. Also known as the creators of DAI, it’s one of the first and most enduring systems in DeFi that lets people borrow money without a bank. Unlike traditional loans, MakerDAO doesn’t ask for your ID or credit score. Instead, it locks up your crypto as collateral—like ETH or BTC—and lets you borrow DAI, a stablecoin pegged to the US dollar. This system has been running since 2017, surviving crypto crashes, regulatory pressure, and market chaos because it’s built on code, not people.

MakerDAO doesn’t just create DAI—it keeps it stable. How? Through a mix of smart contracts, dynamic fees, and a voting system where token holders (MKR) decide on changes like interest rates or accepted collateral types. If the price of ETH drops too fast, the system automatically sells some of your locked crypto to cover the loan. That’s called liquidation. It’s not perfect, but it’s transparent and automated. You’re not trusting a CEO—you’re trusting a set of rules written in code and overseen by thousands of users. This is why MakerDAO is often called the backbone of DeFi: it’s the engine behind billions in loans, savings, and trading across hundreds of platforms.

Related to MakerDAO are three big ideas you’ll see in the posts below: DAI stablecoin, a decentralized, crypto-backed digital dollar used for trading, lending, and payments without volatility; collateralized debt position, a type of loan where you lock crypto to borrow stablecoins, the core mechanism MakerDAO uses; and Ethereum blockchain, the network where MakerDAO’s smart contracts live and run. These aren’t buzzwords—they’re tools real people use every day to move money, hedge risk, or earn yield without banks.

You’ll find posts here that dig into how DAI stays pegged, why some users lock up ETH to borrow DAI instead of selling, and how MakerDAO’s governance votes can shift the entire DeFi landscape. Some posts compare it to other stablecoins. Others show how it’s used in real trading strategies. You won’t find fluff—just clear breakdowns of how it works, what risks you face, and what’s changed in the last year. Whether you’re new to DeFi or you’ve held DAI for years, this collection gives you the facts without the hype.