Definition
Maker is a decentralized finance protocol that enables the creation and management of the DAI stablecoin using overcollateralized positions on a blockchain. It operates through smart contracts that lock collateral assets and generate DAI against them under predefined risk parameters. Governance of the protocol is handled by its token holders, who vote on settings such as collateral types, fee rates, and risk limits. As a core DeFi building block, Maker provides a programmable, crypto-native alternative to traditional credit and stable-value instruments.
As a concept, Maker encompasses both the technical system that maintains DAI’s soft peg to a reference value and the governance framework that adjusts its parameters over time. The protocol’s design is intended to keep DAI relatively stable while remaining fully transparent and on-chain. Maker interacts with other DeFi primitives, including AMM-based liquidity pools and lending markets, where DAI is frequently used as a base asset. Its role within DeFi highlights how decentralized governance and collateralized debt structures can support a broader ecosystem of financial applications.
Context and Usage
In DeFi, Maker is often referenced as a foundational protocol that demonstrates how decentralized collateral management can support a widely used stablecoin. The concept includes mechanisms for handling collateral volatility, setting stability fees, and defining liquidation thresholds, all governed by token holder voting. Maker’s parameters influence how attractive it is to mint or hold DAI, which in turn affects liquidity conditions across integrated platforms such as AMM exchanges and derivatives protocols like dYdX. Because Maker is deeply embedded in on-chain markets, its governance decisions can indirectly shape risk profiles, yield dynamics, and capital flows throughout the broader DeFi ecosystem.