// GLOSSARY -- DEFI

What is MakerDAO?

1 min read Updated

MakerDAO is the protocol behind DAI, a decentralized stablecoin maintained through overcollateralized vaults — one of the oldest and most important DeFi protocols, now rebranding as Sky Protocol.

WHY IT MATTERS

MakerDAO pioneered DeFi lending and decentralized stablecoins. Users deposit collateral (ETH, WBTC, stablecoins) into vaults and mint DAI — a stablecoin soft-pegged to $1. The system maintains the peg through overcollateralization and liquidation mechanics.

DAI is significant because it's decentralized — unlike USDC or USDT, no single company controls it. Governance is through MKR token holders who set risk parameters, collateral types, and stability fees.

MakerDAO is transitioning to 'Sky Protocol' with new branding and expanded functionality, but the core vault and stablecoin mechanics remain foundational DeFi infrastructure.

FREQUENTLY ASKED QUESTIONS

How does DAI maintain its peg?
Through overcollateralization (vaults hold more collateral than DAI minted), stability fees (interest on minted DAI), and liquidation (vaults below threshold are liquidated). The DAI Savings Rate also helps manage supply.
What is the Sky Protocol rebrand?
MakerDAO is rebranding to Sky Protocol with new tokens (SKY replacing MKR, USDS replacing DAI). The core mechanics remain similar but with new governance and product structures.
Is DAI fully decentralized?
More decentralized than USDC/USDT, but not fully. Some collateral types (USDC) are centralized, and governance concentration in large MKR holders creates practical centralization.

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