Fundamentals of the MakerDAO Governance Token

Authors Roman Kozhan, Ganesh Viswanath-Natraj

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Roman Kozhan
  • Warwick Business School, University of Warwick, Coventry, UK
Ganesh Viswanath-Natraj
  • Warwick Business School, University of Warwick, Coventry, UK

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Roman Kozhan and Ganesh Viswanath-Natraj. Fundamentals of the MakerDAO Governance Token. In 3rd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2021). Open Access Series in Informatics (OASIcs), Volume 97, pp. 11:1-11:5, Schloss Dagstuhl – Leibniz-Zentrum für Informatik (2022)


We study the fundamentals governing the price of the MakerDAO governance token MKR. Governance tokens are minted in response to liquidations, and burned in response to growth in the system surplus. MKR tokens appreciate with an increase in system surplus and depreciate with a rise in systemic risk due to DAI liquidation spirals. We discuss incentive compatibility conditions that need to be satisfied for the protocol to maintain the DAI stablecoin peg.

Subject Classification

ACM Subject Classification
  • Applied computing
  • Cryptocurrency
  • monetary policy
  • stablecoins
  • governance token


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