MakerDAO Protocol Overview
Introduction
MakerDAO is a decentralized organization dedicated to bringing stability to the cryptocurrency economy. The Maker Protocol employs a two-token system. The first being, Dai, a collateral-backed stablecoin that offers stability. Second, there is MKR, a governance token that is used by stakeholders to maintain the system and manage Dai. The Maker Foundation and the MakerDAO community believe that a decentralized stablecoin is required to have any business or individual realize the advantages of digital money.
🤖 Maker Protocol
MakerDAO acts as a decentralized global reserve bank that resides on the Ethereum blockchain. It leverages Ethereum smart contracts to automate the collateralization and lending of its stablecoin.
MakerDAO offers several functionalities including:
- The protocol offers a deposit option for ETH that are locked in Maker smart contracts and earn yield in the form of minted Dai tokens.
- MakerDAO allows depositors to earn interest on the DAI they keep in the DAO’s bank. Dai tokens are locked in a DSR (DAI Savings Rate) contract and continuously accrue Dai based on DSR’s interest rate.
- Lock in ETH, WBTC, LINK, MATIC, MANA, and more into a CDP as collateral and receive a low-interest loan in Dai tokens.
💵 DAI vs Tether
Dai is a price stable coin that is suitable for payments, savings, or collateral. It is soft-pegged to the price of one U.S. dollar.
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While Tether is backed by fiat U.S. dollars in audited bank reserves, Dai is backed by overcollateralized Ethereum smart contracts.
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Dai’s price is stabilized at one U.S. dollar using external market factors such as collateralized debt positions (CDPs), autonomous feedback mechanisms and external economic incentives.
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Tether is issued on the Bitcoin blockchain via the Omni Layer protocol while Dai is issued on the Ethereum blockchain.
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Tether is essentially centralized as it can only be created or destroyed by Tether Limited. On the other hand, Dai is more decentralized as Dai can only be created and destroyed by individual users.
Dai Usage Across Multiple Chains
The following charts show the DAI volume across multiple famous chains.
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An interesting result can be seen, almost 98% of DAI volume is related to Ethereum blockchain. By clicking on the Ethereum’s name of the legend of the following charts, we can compare other chains.
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Although Gnosis is based on DAI, it has a negligible volume compared to other chains.
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Polygon’s share has decreased over time, meanwhile Optimism has gained a lot of share.
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Arbitrum share also has increased over time.
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Since Last week Gnosis has lost a lot of share, meanwhile the share of BSC has increased.
Dai Usage By Protocol Type
The following graphs show the usage and utilization ratio of DAI in different platforms.
It can be seen that most volume is transferred in DEX platforms (36.4%), and least volume is traded to/from CEX (about 4.5%). This is an expected behavior from a decentralized stablecoin.
Active and New Users
By looking at the following charts we can infer following points about user’s activity on the protocol:
- During Jan as well as May and beginning of the June, There has been weeks with significant increase in active user count.
- The new user chart also shows increase during said periods, which means some of the unique active users have been new users.
Stablecoins
The following graphs show the prevalence of stablecoins on Ethereum blockchain.
- Right behind USDC and USDT, with 55.2% and 32.2% of transaction volume, respectively, is DAI with 6.3% of volume, around $575 million in volume.
- DAI volume over time has slightly decreased.
- The volume spike in May and June, that we spoke about, can also be seen here.
Withdraws
The next charts depict withdrawal activities on MakerDAO, Let’s find notable points:
- The withdrawal volume has decreased recently.
- Other than massive spike in withdraw count on June and the spike in May, withdraw count has stayed mostly stable.
- The average volume per transaction has also decreased.
- At the end of July the average transaction per wallet increased for almost a week and then stabilized to an average of about 1.8 tx per wallet.
Deposits
The following charts depict the weekly deposit activities. Let’s take a look at the trends seen in these charts:
- Since July, the weekly deposit volume has decreased. During this period the market has been mostly stable.
- There are several spikes in deposit count during Jan, May and June.
- By the end of July, The average deposit count per wallet has increased. At the same time, average volume per deposit has decreased.
MKR and ETH Correlation
The following charts show the price of ETH and MKR, as already stated, MKR is the token related to MakerDAO, which provides utility and governance voting rights.
By simply looking at the charts a correlation can be seen. We are also using corr(A, B)
function to find correlation between these two currencies.
For data since 2022, the correlation is about 0.942, which is close to 1 and indicates high correlation between two series.
Approach
Data Source
To conduct our study, we use the Flipside Crypto database. They offer one of the best and most efficient blockchain data in the industry.
Tables
From said data source, we are using tables provided in ethereum.maker
schema.
Method
To obtain the correlation between series A and B, we use the aggregation function corr(A, B)
. This function gives a result between 1
to -1
:
- 1 indicates a strong positive relationship.
- -1 indicates a strong negative relationship.
- 0 indicates no relationship at all.
Study Period
The study is conducted from the first day of 2022. It is possible to use provided parameter
to change charts visualation period.
There is no liquidation data available for 2022, therefore entire timeframe is visualized.
In Dai Usage Across Multiple Chains section, we use data from July 2022, as all chains are backfilled from this date.
Summary
Lets summarize our findings in this study:
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A total of about 11M ETH is deposited, and almost 3.8M ETH is withdrawn.
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There are high correlation between ETH and MKR.
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Since July, while the market has been stable and even the prices increased slightly, the weekly deposit volume, withdraw volume, vault creation has decreased.
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During Jan as well as May and beginning of the June, There has been weeks with significant increase in active user count.
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DEX platforms (36.4%) had the most DAI volume, and least volume is traded to/from CEX (about 4.5%). As we already said this is an expected behavior from a decentralized stablecoin.
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98% of DAI volume is related to Ethereum blockchain.
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The most active day of the week are Monday and Saturday.
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Most Active Times
The next chart shows the most active and least active week days and hours of the day. The times are in UTC time zone.
By looking at the following charts, we can understand that:
- The most active day of the week are Monday and Saturday.
- The most active hour is 11:00. Around Noon (11:00 to 15:00) and Afternoon (19:00 to 21:00) are most active hours.
- There is not a huge difference between daytime and night time, this means that the MakerDAO protocol is used all over the world, while it is used a little more in the western world.
- There are some times of high utilization, such as
- Monday during day, especially around 12:00.
- Tuesday at 2:00.
- Thursday around 5:00
- Saturday entire since morning untill 22:00.
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