The MakerDAO (MKR-USD) community is one of the best examples in the world of a decentralized autonomous organization (DAO). Maker community members have been diligently keeping the network running for over four years through proposals and governance. And this week, the community is discussing one of its biggest proposals yet. If users accept it, the MKR crypto could take on a new role.
News of this proposal has several community members getting excited. Moreover, the MKR crypto itself is seeing a boost from the news, with prices up more than 8%.
So, what are the details surrounding the proposal, and how will it affect MKR? Here’s what you need to know.
MKR Crypto Gets a Boost With Sweeping New Proposal
- A DAO is an organization that looks over any sort of special interest. The community members are given voting power, and any sort of action taken by the organization must be voted on democratically.
- The MakerDAO community oversees the Maker network — a crypto network which manages one of the largest stablecoins in the world, Dai (DAI-USD).
- The new proposal making its way around the Maker community seeks to address the drop in MKR crypto prices. In the last year, the crypto has continued to trend downward, although the DAI stablecoin the community supports continues to grow in supply and market capitalization.
- According to the proposal, one solution to this price drop is adding a new function for MKR. The particular user who submitted the proposal is advising a staking function. Through this function, users can passively earn a new token, stkMKR, atop their MKR holdings.
- To better explain the ultimate purpose for stkMKR, one must first understand Dai’s function. Dai primarily fuels DeFi lending; users can provide collateral in exchange for a Dai loan which they pay back with interest over time. Typically, the MakerDAO protocol uses these fees to buy back MKR and burn it, reducing supply.
- Under the proposal, fees would come not just from Dai, but from staking MKR for stkMKR. The protocol would then use these fees to buy back MKR and burn it, while also rewarding those who stake.
- The supply reduction and the reward mechanic would then implicitly lead to a price increase for the MKR crypto.
- By locking rewards and stkMKR for a period of three weeks, the proposal can also prevent users from buying MKR just to vote on special interests before selling.
- Right now, the proposal remains just an idea. If it gains enough steam, though, the community can move the proposal to a vote and potentially adopt it.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.