Developers began building early code and documentation for what became MakerDAO, aiming to create a crypto-backed stablecoin on Ethereum. This early work established the idea of generating a dollar-targeting token through overcollateralized loans managed by smart contracts.
Maker published its first formal white paper describing the original Dai system (later called Single-Collateral Dai, or “Sai”). It explained how users could lock ETH into smart contracts (CDPs, later called Vaults) and generate Dai debt against that collateral, with governance designed to help keep Dai near $1.
The system went live, allowing users to generate Dai against ETH collateral using the Single-Collateral Dai design. This activation marked Dai’s operational start as an on-chain stablecoin system rather than just a proposal.
Maker described the Dai Savings Rate (DSR) concept as a protocol feature that would let Dai holders lock Dai in a smart contract to earn a variable rate. The DSR was framed as an additional “monetary policy” lever to help manage Dai’s supply and demand and support the $1 target.
Andreessen Horowitz’s crypto fund (a16z) invested $15 million to buy about 6% of MKR, giving it a governance and economic stake in Maker. The deal helped validate Maker’s approach and provided resources as Dai adoption and risk management needs grew.
Maker leadership publicly set a target date for the long-planned upgrade to Multi-Collateral Dai (MCD). The upgrade was intended to allow collateral beyond ETH and to add new system features, reflecting lessons from operating Single-Collateral Dai at scale.
To reduce confusion during the protocol upgrade, Maker documentation instructed apps and partners to rename the old Single-Collateral Dai token to “Sai.” This naming change helped distinguish the legacy system from the new Multi-Collateral Dai that would keep the “Dai” name.
Multi-Collateral Dai (MCD) was enabled after MKR holders approved an executive vote, allowing Dai generation against more than one collateral type. The activation also introduced the Dai Savings Rate in the new system and began a long migration away from the original Sai system.
After MCD launched, Maker governance adjusted parameters like the Dai Savings Rate to influence Dai demand and supply. This period showed how Maker relied on governance-controlled rates as practical tools to keep Dai close to $1 during changing market conditions.
A sharp crypto market drop and Ethereum network congestion triggered large-scale Maker Vault liquidations. Some auctions cleared at “zero bids,” creating protocol losses and highlighting how market volatility and on-chain capacity limits could combine into a system-wide failure mode.
Maker governance added USD Coin (USDC) as an accepted collateral type, aiming to increase Dai supply and help bring Dai’s market price back toward $1. The decision was controversial because it increased reliance on a centralized asset, but it was treated as an urgent stability measure after Black Thursday.
Maker’s design includes “debt auctions,” where newly minted MKR can be sold for Dai to cover system shortfalls (bad debt). After the March 2020 losses, this mechanism became a key part of the recovery plan, shifting some costs to MKR holders to restore system solvency.
Maker’s original Single-Collateral Dai system was shut down, completing the transition to the Multi-Collateral Dai architecture as the primary system. This marked the end of the initial 2017-era design and left Maker operating mainly through the upgraded MCD contracts and governance process.
MakerDAO and the creation of DAI (2014–2020)