MakerDAO
Reported
The MakerDAO Collateralized Debt Position (CDP) is a smart contract which runs on the Ethereum blockchain. It is a core component of the Dai Stablecoin System whose purpose is to create Dai in exchange for collateral which it then holds in escrow until the borrowed Dai is returned.
CDPs alter the total supply of outstanding Dai, creating Dai when new assets are leveraged and destroying existing Dai when it is repaid to the position. This cycle of controlled minting and burning allows the contract to account for the total supply of the stablecoin, thus proving that the portfolio of backing collateral can always guarantee the value of circulating Dai.
The amount of collateral in a CDP is always set to be significantly higher than the amount of the debt, so stability seekers who wish to use Dai as a predictable store of value can be confident that 1 DAI is worth approximately 1 USD in underlying assets.
Join the community to learn more about Maker, chat with the team, and have your say in shaping the future of commerce on the blockchain.