Pros And Cons Of Maker

By Sumedha Bose

If you have found yourself asking whether Maker can surpass Bitcoin, then chances are, you are already aware of this new stablecoin that it offers. However, a lot of the crypto world is still not as familiar with Maker as they would ideally want to be, before even considering investing in it. So we are going to break it down for you.

According to the website,

Maker is an open platform that allows equal access to high quality financial services, including fair credit for everyone.

It consists of a stable coin called Dai, which is equivalent to $1. Dai is the product that Maker is responsible for. The concept of a stablecoin is simple to understand — it’s a token (like bitcoin and ether) which exists on a blockchain. The only difference is that since it is equivalent to one USD, it is not volatile like bitcoin and ether. You can check out our piece on the 10 features of Maker to know more about the coin. For now, let’s see what the pros and cons are:

Pros

  1. The key asset of Maker is the fact that its a stablecoin, which granted, offers its stability. Due to its value which remains constant, it is spared from market brutality of ups and downs, and maintains a stable level, and is great for both long-term and short-term investments.
  2. Dai holders have the brilliant option of lending the coins and earn interest. The calculation of interest amount is easy to do with Dai as the coin is stable enough.
  3. Maker provides the option of liquidation. So if someone’s CDP appears to be too risky, it can be liquidated as per the target price that was set. The Maker Platform can determine as to when a CDP becomes risky and must go for liquidation. This process is completely automatic

Cons

  1. There is a system of collateral that you need to show in order to acquire Maker Dai. It has a collateralised derivative contract, which has a lot of steps that could be confusing for the trader.
  2. In the event of an Ethereum black swan event, the value of the underlying collateral, and therefore the value of the stablecoin, will also be wiped out. This could potentially disrupt your entire holding.

Read more about MakerDAO here.

Sumedha Bose

Sumedha uses words as her crutch to get by in life. She takes a keen interest in debating, dancing and destroying the patriarchy in her free time. She can be contacted at [email protected].

Related Posts