The Ultimate Guide to
Trading Maker (MKR) and Dai (DAI)
Maker (MKR) is both a digital token that floats freely in value, as well as a decentralised platform based on the Ethereum blockchain. The MKR token gives voting rights to the margin system, generating a decentralised ‘stablecoin’ known as Dai (DAI) that is pegged to the U.S. dollar.
As an overview, stablecoins have their value pegged to a particular asset. This peg is usually maintained by keeping collateral in that asset equal to the amount of the stablecoin’s market capitalisation. Maker has plans to introduce a series of stablecoins tied to the value of other currencies and even valuable assets such as gold.
In the case of the Dai, which is the first decentralised stablecoin operating on the Ethereum blockchain, it is backed by collateral kept in an escrow account. Dai gets generated by the Maker platform when a user puts up extra Ethereum-based tokens as collateral. Dai can also be used for loans.
Holders of Maker’s MKR token manage the collateral used to back the Dai stablecoin by direct vote. MKR also acts as a token by which to access the Maker platform, as well as financing the project’s activities. MKR holders are often thought of as shareholders, taking part in a decentralised autonomous organisation (DAO).
Buying and selling MKR and Dai digital tokens is typically safer when operating via a regulated online broker.
How not to get scammed when trading MKR and Dai
Trading cryptocurrencies through exchanges is quite popular, but these enterprises are rather poorly regulated and can subject their users to large losses due to hacking.
For example, the Tokyo-based Coincheck suffered a hack of $534 million XEM coins in 2018, and Mt. Gox lost 850,000 bitcoins to hackers in 2014. South Korean crypto exchange Youbit had to file for bankruptcy in 2017 after two hacks.
Furthermore, like in every industry there are fraudulent activities or scams to look out for when trading online. An investor should be wary of firms that try to charge a start-up fee to exchange Dai or MKR instantly for cash.
Also avoid investment schemes that claim to be able to double asset values overnight, since they are usually misleading. Phony crypto exchanges and fake cloud mining operations are also scams to watch out for.
Another risk when trading online, often seen in social media or email approaches is phishing. This involves a third party attempting to impersonate a well-known brand to obtain access to passwords, accounts and even cryptocurrency wallets. Minimize the risk of these scams by not making financial arrangements or sharing personal information using direct messages or links contained in such messages.
Whenever possible, find a regulated broker to deal through. One example is the Dublin, Ireland based AvaTrade, that is part of a firm worth over $17 billion and is subject to strict regulation under the EU’s Markets in Financial Instruments Directive (MiFID) and subsequent revision, the MiFIR. Similarly, eToro that also provides a similar platform and has operations in the EU.
In short, using one of the various online regulated brokers should help minimize associated risks to online trading.
Trading MKR and Dai through AvaTrade
Ranking among the top regulated online brokers, AvaTrade has a free and user friendly trading platform known as MetaTrader 4 (MT4). It is suitable for traders of any experience level and has versions for desktop, tablet or phone.
MT4 provides advanced charting capabilities to facilitate technical analysis. It can also be personalised by allowing colours and display styles to be varied by the user. The sign up for a trading account is also a simple process. Plus, in addition to digital tokens, AvaTrade also provides traders with access to thousands of other assets.
Key influences on Maker and Dai
All currency trading involves some form of risk. This is particularly related to the values of free floating digital tokens like MKR that can fluctuate according to influencing factors. While stablecoins like Dai tend to be relatively stable compared to the asset they are pegged to, some price variation can occur.
The values of floating cryptocurrencies like MKR are subject to supply and demand factors. For example, if someone sells a large amount of MKR, then subsequently its value may decline. Collateral backed stablecoins like Dai, although relatively stable can still fluctuate in relation to currencies such as the euro or pound sterling, as the Dai is pegged to the U.S. dollar.
Furthermore, when governments step in to regulate or prohibit the use of digital currencies, their values can often decline. Alternatively, if some large retail or payment companies start to accept MKR, then that could potentially boost its value. Also, a lack of confidence in the digital currency, perhaps due to a major hack, could also lower its price.
Other factors that can influence a cryptocurrency’s value are events such as the Cyprus banking crisis in 2013 that boosted the value of bitcoin as people tried to find alternative ways to store their funds outside their jurisdiction. Additionally, technological improvements can also change the value of an affected digital coin.
Maker (MKR) Quick facts:
Source: CoinMarketCap.
- Year MKR started trading: January 2017
- Highest price to date: U.S. $1,773.92 on January 18th, 2018
- Market Capitalisation (16 July 2019): $556,590,199
- Volume of MKR exchanged (daily): $1,561,040
- Circulating Supply: 1,000,000 MKR
Dai (DAI) Quick facts:
Source: CoinMarketCap.
- Year DAI started trading: December 2017
- Highest price to date: U.S. $1.37 on February 3rd, 2018
- Market Capitalisation (16 July 2019): $83,670,211
- Volume of DAI exchanged (daily): $43,941,825
- Circulating Supply: 85,554,493 DAI
Want to trade other cryptocurrencies?
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