Maker for Dummies, Part 2

  1. Accept user’s pledged collateral
  2. Check parameters for lending against this specific collateral
  3. Create a Dai facility against the collateral
  4. Given the loan is paid back in full with interest, release the collateral and send part of the interest payment to MKR holders by burning MKR tokens.
    — — — — — — — — — — — — — — — —
  5. If the loan goes below a certain threshold, liquidate the collateral for Dai up to the value of the loan — destroy this Dai
  6. In the event of a liquidation, if there is not enough collateral to cover the value of the loan in Dai, dilute MKR token holders by printing MKR tokens and selling it for Dai until there is enough to offset the loan
  1. Deposit $1000 of “Token.”
  2. Borrow 500 Dai (50% LTV or 200% collateralized).
  3. Hold loan for one year and pay back 505 Dai (1% APY).
  4. 500 Dai destroyed.
  5. Liquidate 5 Dai for MKR tokens and burn them.
  6. Withdraw “Token.”
    — — — — — — — — — — — — — — — -
  7. If the value of “Token” < $750 (<150% collateralization ratio), liquidate enough “Token” to raise 500 Dai.
  8. Return excess “Token” to the user.
  9. If “Token” liquidation results in < 500 Dai raised, print sufficient MKR and sell it until there is a total of 500 Dai available.
  10. Destroy the 500 Dai.
  • Fungible
  • Portable
  • Tradable
  • Durable
  • Valuable
  • Stable

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