MakerDAO (MKR) 2018 prediction: Is it too late to buy MKR?
MakerDAO's MKR token is now the second most expensive crypto, overtaking Ethereum.
OPINION: Sitting at around US$1500, MakerDAO's MKR token has grown more than 50% in the past month as the governing token behind the DAI stablecoin.
It managed to survive a drop during the crypto apocalypse to keep DAI afloat, and has since bounced back stronger than ever.
In the last week since its big drop it has surged back almost 100% from its low of just over US$800, according to CoinMarketCap data.
What is MakerDAO MKR and DAI?
DAI is the main currency for MakerDAO, while MKR is what stabilises it.
Think of DAI like the cash the bank gives you when you take out a mortgage, except the house you use as collateral is ether through an Ethereum smart contract. If the value of your ether goes down, you then need to pay back the DAI you own to make up for it, or your ether goes up for auction.
This ether is essentially what is used as the first line of guarantee to keep DAI stable. When the price of ether drops to a certain threshold level, it is sold off to retain the price of DAI.
Now this works for small drops, but for large drops there needs to be a second layer. And this is where Maker's MKR token comes into play.
The MKR token itself is actually now worth more than Ether at US$1,400 each. Owners of MKR act as the governance of the Maker smart contracts, and in return for regulating the coin, owners of MKR are paid a fee.
However, there's a catch for MKR holders. If there is a large discrepancy with the value of DAI, due to not selling off ether soon enough, the MKR token acts as a buyer of last resort. If there is not enough ether in the system to act as collateral, then MKR is created and sold on the open market.
This means, that its in the MKR holders' best interest to correctly keep DAI stable, as it will be their money that gets lost not the DAI if it starts turning sour.
MKR got its first big test last week, as its market cap lost over US$300 million to keep DAI stable, which it did, and has since bounced right back up.
Can MKR grow in 2018?
2018 is going to be a big year for decentralised exchanges, as well as crypto hitting the mainstream - DAI helps enable both of these.
MKR's growth as an investment relies completely on the uptake and use of DAI as a currency.
Many experts believe 0x will have a big year as one of the first major decentralised exchanges, allowing for safer, more secure trading. DAI could be used as a currency to trade against here, removing the need for fiat currencies such as USD or slow, expensive options such as bitcoin.
Likewise, having a stablecoin that's genuinely blockchain-based creates for the first time a viable option for blockchain-based loans and lines of credit. It also makes much more sense as a token to be used for everyday transactions than the likes of bitcoin.
As long as DAI's adoption continues to grow, so can MKRs. There is a lot of potential for DAI in 2018, however time will tell if it actually gets adopted.