While MakerDAO, the decentralized loan platform, is at the core of decentralized finance, its native Maker (MKR) token has plunged against Ethereum over recent months.
In March, MKR traded at 2.5 ETH, meaning that it cost 2.5 ETH to purchase one of the tokens. But since that date, the cryptocurrency has been on a continuous decline against Ethereum, falling from the 2.5 ETH level to lows near 0.7 ETH just recently.
This comes in spite of immense growth in the market capitalization of DAI, MakerDAO’s native stablecoin and the cryptocurrency through which loans on the platform are issued.
The cryptocurrency has appreciated in excess of 80 percent in the past 7 days, reaching multi-year highs against the U.S. dollar.
Maker (MKR) sees strong performance
On Wednesday, MKR traded as high as 1.05 ETH per coin, or around $1,200, which is the highest the cryptocurrency has been against Ethereum in months and the highest against the dollar in years.
The rally in the cryptocurrency comes as the MakerDAO platform, which allows users to deposit crypto collateral to take loans in DAI, has continued to maintain its dominance as the most-used DeFi protocol by total value locked. There is $4.21 billion worth of cryptocurrency locked in the platform, up six percent today.
Chris Burniske, a partner at Placeholder Capital, celebrated the rally, drawing attention to a tweet he made a number of months ago accentuating MakerDAO’s importance to the overall decentralized finance space.
How Maker works is that users deposit collateral, pay a fee on that collateral depending on what coin it is, then take out DAI as a loan.
These fees accrue to MKR holders through token burns. More than 2.25 percent of all MKR in circulation is expected to be burnt over the next year if the current fee structure remains.
The need for decentralized stablecoins
The rise in MKR’s price and the continued march higher of the DAI stablecoin supply comes as the need for decentralized stablecoins has grown.
While centralized stablecoins were recently validated by the U.S. Treasury in a number of announcements and clarifications regarding banks’ ability to use the technology, there are some that expect centralized stablecoins to fall under banking law soon.
House Democrats recently unveiled a bill that would put stablecoins under banking law.
While DAI and other decentralized stablecoins may fall into that same category, it will be hard to regulate these decentralized coins under banking law, as there is no central issuer.
The post Maker (MKR) rips 80% higher over past week after extended bear market against Ethereum appeared first on CryptoSlate.
Source: Maker (MKR) rips 80% higher over past week after extended bear market against Ethereum