Synthetix offers a unique approach to DeFi (decentralised finance) through its ability to track and provide returns on underlying (synthetic) assets without requiring one to directly hold the asset. By depositing Synthetix's native token, the SNX token, into a smart contract, users can mint synthetic fiat currencies (or any supported underlying assets) known as synths that can be tracked and traded through the platform or other DeFi platforms.

Formerly called Havven, Synthetix rebranded in 2018 and has built up a solid reputation within the crypto and DeFi ecosystem. 

What is Synthetix (SNX)?

Synthetix is a groundbreaking decentralised asset protection protocol that permits users to mint, hold, and trade derivatives across different asset classes such as commodities, fiat currencies, stocks, and even cryptocurrencies like Bitcoin. This provides an efficient way to gain exposure without needing ownership of the underlying securities or having to rely on centralised intermediaries.

Through the protocol's synthetic assets known as synths, collateralised by the Synthetix Network Token (SNX), users can gain access to classic financial assets and opportunities for new trading strategies while also realising an increase in the value and liquidity of the underlying assets. The platform also offers binary options, and opportunities to gain capital for different components within the Synthetix ecosystem. 

When the platform launched in 2017 it was governed by the Synthetix Foundation, an Australian non-profit foundation. However, by 2020, the ecosystem is now governed by three decentralised autonomous organisations:

• ProtocolDAO: responsible for controlling the funding for protocol upgrades and changes to Synthetix’s smart contracts
• GrantsDAO: responsible for controlling funding for the community proposals for public goods on Synthetix
• SynthetixDAO: responsible for controlling funding for entities that are advancing the network’s development.

Synthetix provides a decentralised, permissionless, and censorship-resistant platform that allows users to gain exposure to both crypto and non-crypto assets without the need for ownership of these assets. This enables anyone with an interest in DeFi to join the industry through the use of synthetic assets regardless of whether they hold the actual assets or not.

Who created the Synthetix platform?

The platform was initially launched by Kain Warwick in 2017 under the name Havven (HAV) before rebranding to Synthetix a year later. Warwick has previously been an Advisory Council Member in Blockchain Australia and an Advisory Board Member at The Burger Collective. 

Warwick teamed up with software developer Peter McKean, the platform's acting CEO and business strategist, and market analyst and sales leader, Jordan Momtazi, who acts as COO. The CTO, Justin J. Moses, co-founded Pouncer with Warwick, an Australian live-action site, and has been a part of Synthetix since its conception. 

In 2018, the platform raised $30 million through an Initial Coin Offering (ICO) initiative. In 2019, Synthetix raised a further $3.9 million by selling SNX tokens to Framework Ventures. 

The initial goal of the platform was to create cryptocurrencies that tracked the performance of cash like the U.S. dollar or the euro on various blockchains, including Ethereum and EOS. After rebranding, the platform expanded its goals to incorporate synthetic assets for commodities and other cryptocurrencies. 

How does the Synthetix protocol work?

Synthetix's synthetic assets minting service is powered by two separate cryptocurrencies. The first cryptocurrency is its native token, Synthetix Network Token (SNX), and the second is synths, a versatile digital asset with the capability to mimic any real-world underlying asset.

In order to generate synths, a user will need to buy SNX and deposit it onto the platform. The platform will then create a new synth token relative to what the user is after. The value of the deposited SNX is then locked and is required to remain at or above 750% of the value of the synth created. I.e. if a user deposited $1,000 worth of SNX to create synthetic Euros, they would receive $133 worth of sEUR. 

Economics

As the SNX token is a tradable cryptocurrency its value is dependent on the open market. As the price fluctuates, the number of synths in circulation will also fluctuate. I.e. when the SNX price rises, the protocol will release additional SNX tokens that are not needed to guarantee previously created synths. These SNX tokens can then be locked up again to create new synths. 

Using the example above, if the price of SNX doubled this would release half of the $1,000 of SNX tokens locked up. These funds could then be used to create more sEUR synths. The higher the SNX price, the more synths can be created. 

Kwenta (DEX)

The Synthetix protocol uses price feeds known as oracles to determine the price of synths. When two synths are exchanged, the first synth is burned (destroyed) and the synth it is being exchanged for will use the price feed to determine its price. The protocol will then automatically create the correct number of synths based on this information. 

Another important element of the Synthetix ecosystem is Kwenta, a decentralized exchange (DEX) that facilitates the trading of synths and cryptocurrencies. Kwenta utilizes peer-to-contract trading, using smart contracts instead of an order book.

Bypassing central exchanges and the capacity to deal with large amounts of orders, this peer-to-contract style of trading easily converts currencies and does not require any waiting periods for matches to be fulfilled. 

DeFi

As synths are Ethereum-based they can be deposited on other compatible DeFi platforms (Uniswap, Curve) to provide liquidity and earn interest. Alongside derivatives, synths play an integral role in building markets and helping them reach equilibrium by facilitating price recovery and assisting to hedge against volatility.

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What is SNX?

Synthetix Network Token (SNX) is an ERC-20 token native to the Synthetix ecosystem. The tokens are used to provide collateral when minting the synthetic assets on the platform, meaning that they are locked up in smart contracts when synths are created, and can also be used for staking. When deposited into the staking pool holders earn rewards, which are generated through transaction fees paid on the Synthetix Exchange. 

Through the derivatives liquidity protocol, the exchange also provides a platform for trading synths (digital assets portraying real-world assets).

There is a maximum supply of 308,069,419 SNX, of which there are roughly 81% in circulation (at the time of writing). 

How can I buy Synthetix (SNX) tokens?

Anyone can add SNX tokens to their cryptocurrency portfolio by acquiring them through a cryptocurrency exchange. Ensure that the one you use is reputable, licenced and above board.

One of the first stablecoins to come into existence, Dai was launched in 2017 and is maintained and regulated by MakerDAO. Using a series of smart contracts, Dai maintains a value of $1, or very close to it. Due to the coin’s soft peg to the US dollar, the Dai stablecoin not only provides a stable long-term store of value but also a strong medium of exchange. 

Let’s explore what Dai is and how it contributes to the crypto ecosystem. 

What are Dai tokens?

Dai is an ERC-20-based stablecoin pegged to the US dollar. While more stablecoins hold the fiat currency to which they are pegged in reserves, the Dai stablecoin instead uses several cryptocurrencies to ensure it holds its peg. 

Supported cryptocurrencies include Ethereum (ETH), Basic Attention Token (BAT), USD Coin (USDC), Wrapped Bitcoin (wBTC), Compound (COMP), and many more. With a wide range of collateralised cryptocurrencies, user risk is decreased and Dai's price stability is increased.

Dai is issued and operated by the Maker Protocol and the MakerDAO (decentralised autonomous organisation). Designed to provide a means of lending and borrowing crypto assets, the Dai stablecoin was at the forefront of the DeFi revolution. Holders of Dai can also earn interest.

The platform has another coin, MKR, which allows holders to set the Dai Savings Rate (DSR) and act as guarantors for Dai. This ensures that MKR tokens can be liquidated if the system fails. This structure motivates guarantors to ensure that the Dai system and its collateralised coins operate properly.

How do you generate Dai?

Users can generate Dai by paying collateral assets. Dai is created when users deposit ETH or any supported cryptocurrency as collateral. The equivalent amount of Dai is then issued and the user will receive Dai tokens.

If the Dai holders want the collateral assets back, the borrowed Dai can be paid back (plus a stability fee) and the collateral assets will be released. This Dai coins are then removed from circulation.

History of the Dai stablecoin

The MakerDAO was first launched in 2015 by Rune Christensen and is the longest-running protocol on the Ethereum blockchain to date. It holds more than 2.3 million ETH in its protocol, approximately 2% of Ethereum’s total supply.

When first created, only ETH could be used as collateral, however, in 2019 more cryptocurrencies were added to this list. The Dai price has always been soft pegged to the US dollar.

How does DAI work?

The Dai cryptocurrency is an ERC-20 token that can be bought on both centralised and decentralised exchanges (DEXs). Users can also generate and borrow Dai by using MakerDAO's Oasis Borrow dashboard to establish a Maker collateral vault and put Ethereum-based assets in as collateral.

In its original use, the Maker protocol stored collateral in smart contracts known as maker collateral vaults. These smart contracts held collateral in escrow until the borrowed Dai was repaid, also known as collateralised debt positions (CDPs). The value of the security you send always exceeds the amount of DAI you receive otherwise the collateral will be liquidated. 

The Dai platform is one of the most integrated digital assets in the blockchain industry and can be utilized across decentralised finance (DeFi) applications and blockchain-based games, among other places.

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Since launching in 2017, Tron has taken the world by storm with its blockchain technology-based operating system. Users around the world have flocked to the Tron blockchain network released to create dapps (decentralised apps) and smart contracts, attracting plenty of investors at the same time. 

In a pool of a large number of digital assets, below we explore what Tron is and what it brings to the crypto industry.

What is Tron (TRX)?

The Tron blockchain is a platform on which developers can create dapps, smart contracts and tokens through its delegated Proof-of-Stake (DPoS) model. Initially built on the Ethereum blockchain with an ERC-20 token, in 2018 the Tron protocol moved onto its own blockchain and created the Tron TRX tokens. 

That same year, the Tron foundation acquired BitTorrent, the biggest file-sharing site on the internet. In 2019, the platform launched the BitTorrent token, essentially releasing a second token under the same umbrella company. 

The aim behind the platform was to provide developers with a space in which they can create blockchain-based products, as well as better reward content creators for their efforts. The Tron network allows viewers to directly reward the creators using the TRX token, cutting out the middle-media-man and subsequent losses. 

With a higher TPS (transaction per second) processing capability, Tron establishes itself above its peers. According to the platform, Tron can handle up to 2,000 TPS, a high increase from the likes of Bitcoin’s 6 TPS and Ethereum’s 25 TPS.

Who created the Tron network?

The Tron concept was created and launched by Tron founder Justin Sun (Sun Yuchen), a two-time recipient of the “30 Under 30” Forbes’ accolade. Before Tron, Sun launched an audio content platform Peiwo and worked as a representative for Ripple, where he earned the attention of big investors.

Justin Sun is currently acting as the CEO of the Tron Foundation.

How does the Tron protocol work?

The Tron platform uses a DPoS model and consists of three layers: the core layer, the application layer and the storage layer. 

The Core Layer is responsible for computing instructions written in either Java or Solidity (the programming language Ethereum uses) and sending them to the Tron Virtual Machine which in turn executes the function.

The Application Layer is used by developers and allows them to create dapps and wallets compatible with the relevant software and powered by TRX. 

The Storage Layer is designed to divide the state data (the data that maintains the status of smart contracts) and the blockchain data (the data that holds the transactional history).  

Through the DPoS system, 27 “super representatives” on the network take turns to validate the transactions and maintain the blockchain data. These representatives are chosen every six hours and, when chosen, earn TRX for their contributions to the network. 

Users can vote for super representatives and engage in staking by locking their TRX in an account and receiving Tron Power in return. Tron Power can then be used to vote for the super representatives, and when returned to TRX, lose the ability to vote. 

Block creation time on the Tron network is three seconds, with the current block reward set at 32 TRX. 

There are also three different nodes that users are able to operate: witness nodes, full nodes and Solidity nodes. Witness nodes can vote on protocol decisions and propose blocks, full nodes are responsible for broadcasting transactions and blocks to the network while Soliditiy nodes sync the blocks from the full nodes and provide APIs. 

What is TRX?

TRX is the native token to the Tron network. Initially created as an ERC-20 token, when the coin was launched on the Tron network holders of the ERC-20 version were able to swap them out and receive the new version. All ERC-20 tokens were then burnt. 

TRX is needed for using applications on the Tron network, staking, and participating in Tron’s consensus system.

How can I buy Tron?

If you’d like to acquire TRX, you will need to do so through a trusted cryptocurrency exchange. Ensure that you do thorough research on both the coin and the exchange.

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A platform every sports fan needs to know about, Chiliz is the number one place to go for sports-related fan tokens. CHZ is the token behind the platform, and the platform is the gateway for fans to tap into unique experiences with their favourite sports team. 

What is the Chiliz Network?

Chiliz is the company that owns Socios.com, and CHZ is the token that fuels the platform. Through the Socios NFT marketplace, traders can buy their favourite fan tokens, using CHZ to facilitate all transactions. 

Built on Ethereum, Chiliz provides users with an opportunity to buy branded NFT tokens using the ERC-20 and BEP-20 CHZ tokens. Fans can also earn NFTs through contests or exchange them for team-specific merchandise and benefits. Some fan tokens reward fans with access to meet the players and vote on club decisions. The platform currently supports over 50 different sports and entertainment-specific fan tokens.

Leveraging blockchain technology, Socios directly engages fans with the team/entertainer, a step up from just watching games or buying team merchandise. Chiliz allows each team that partners with them to design unique experiences for their Fan Token holders. These Fans Tokens also give the holder sway over decisions usually left up to the team, like what songs play when a goal is scored, new uniform designs, and even which players start in some games.

Additionally, Chiliz helps sports franchises make money from fans in new ways, while providing unique experiences to their most loyal supporters.

Who created the Chiliz Network?

Chiliz was founded in 2012 by Alexander Dreyfus, its acting CEO. The company falls under the Mediarex Group, an international sports and entertainment organisation, and holds esteemed partners including Sam Li, former Vice President of the NBA, Nicolas Maurer, CEO of esports team Vitality, and Dr. DisRespect, one of the world’s largest video game streamers.

In 2018, the blockchain-based Socios platform was launched, alongside the CHZ token. Following funding of $66 million by Private Placement in 2019, the platform launched its website and app. Today, the company also has offices in France, Turkey, Spain, South Korea, and Brazil.

How does the Chiliz Network work?

The CHZ token can be used on both the Ethereum blockchain as an ERC-20 token and on the Binance Smart Chain as a BEP20 token. Fans looking to engage on the platform can buy CHZ tokens from Chiliz.net, the platform's own exchange, or from other cryptocurrency platforms.

Users can then purchase Fan Tokens using CHZ from the Socios marketplace. The platform supports a wide range of sporting teams, from Formula 1 teams to FC Barcelona to Golden State Warriors basketball team. Each team that partners with the platform can dictate the fan tokens prices, distribution and supply, as well as unique opportunities they wish to give to fans. Based on the token's performance, they can be burned in order to make a winning team's tokens more valuable. 

As an example of the privileges offered with fan tokens: for eight years, the Juventus soccer club played Chelsea Dagger in the stadium whenever the team scored a goal. Recently, however, fan token holders chose Blur's Song 2 as the new victory song, and Juventus made the switch. The more fan tokens one holds, the bigger their vote.

The blockchain network is built on Ethereum and uses a Socios sidechain to create and verify all fan tokens. This process utilises the Proof of Authority (PoA) consensus mechanism which relies on a small group of authorised verifiers. This consensus model leans towards business structures looking to be scalable and efficient.

Chiliz is also partnered with the decentralised oracle network Chainlink, through which it creates unique non-fungible tokens (NFTs). These NFTs are used to celebrate special events such as championships or player milestones.

What is CHZ?

CHZ is compatible with both the Ethereum and Binance Smart Chain platforms. The token is used as a medium of exchange on the Socios platform, allowing fans to buy Fan Tokens. 

There is a maximum supply of 8,888,888,888 CHZ in existence, and at the time of writing roughly 70% are in circulation. 

Where can I get CHZ?

Users looking to acquire CHZ tokens will need to do so through a cryptocurrency exchange. Ensure that you do your own research prior to buying the coin, and that you use a reputable and licenced exchange.

Gnosis Chain is an EVM compatible, community owned network that prioritises credible neutrality and resiliency, open to everyone without privilege or prejudice. Using the same execution layer and consensus layer clients as Ethereum, Gnosis Chain is compatible with all future EIPs.

Its diverse validator set up and the community governance ensure Gnosis Chain remains credibly neutral at a much lower price point than mainnet. Only 1 GNO is required to spin up a validator and the process is user-friendly.

Gnosis Chain uses a dual-token model. xDAI is a stable token used to pay for the execution of smart contracts and gas fees, and GNO is used for staking as the governance token for the GnosisDAO.

What is Gnosis?

The Gnosis mission has always been centered on experimentation and building decentralised infrastructure for the Ethereum ecosystem. When Gnosis was founded in 2015, it focused on building prediction markets to enable worldwide access to accurate information. While creating the prediction market platform, it became clear that Gnosis needed to build the infrastructure required to support it.

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As a DAO, Gnosis uses the products that it creates to transparently guide decisions on the development, support, and governance of its ecosystem.

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Gnosis Safe (multisig and programmable account), Cow Protocol (formerly CowSwap and Gnosis Protocol), Conditional Tokens (prediction markets), Gnosis Auction, and Zodiac (standard and tooling for composable DAOs) are all products incubated by Gnosis. By combining needs-driven development with deep technical expertise, Gnosis has built the decentralised infrastructure for the Ethereum ecosystem.

In November 2021, both the xDAI and GnosisDAO community voted to combine their vibrant ecosystems to create the Gnosis Chain: an EVM compatible, community owned network that prioritises credible neutrality and resiliency. It uses the xDaitoken and includes a wide-ranging group of projects and users. Secured by over 100k validators around the world, Gnosis Chain has all the tooling that you are used to and trustless bridges to mainnet soon. Using the same execution layer and consensus layer clients as Ethereum, Gnosis Chain is compatible with all future EIPs."

Who created Gnosis crypto?

Gnosis was founded by Martin Koeppelmann, Stefan George, and Friederike Ernst in 2015. Gnosis was one of the first projects backed by the Ethereum-focused incubator, ConsenSys, and has grown into a 60+ team with its main development hub based in Berlin.

The project successfully underwent an ICO (initial coin offering) in 2017, raising 250,000 ETH (around $12.5 million at the time). In just 15 minutes, the project sold 4% of its GNO supply.

A few months later, the Gnosis team launched Olympic, a test version of the prediction market platform. The next year, it launched Apollo, version 1.0 of Gnosis alongside DutchX, a decentralised exchange designed to trade and manage digital assets. Toward the end of 2018, the Gnosis ecosystem launched the Gnosis Safe, the platform's integrated wallet. In 2020, Gnosis became a DAO and in 2022 both Cow Protocol (DEX) and Safe (wallet) successfully spun out. To date, Gnosis Chain is one of the latest projects of GnosisDAO.

How does the Gnosis ecosystem work?

The Gnosis ecosystem has several components that help to improve the utility of Ethereum.

CoW Protocol‍

The CoW Protocol is a permissionless decentralised exchange (DEX) that allows users to swap any ERC-20 token – the fungible token standard developed by Ethereum – for another.

What makes the CoW Protocol unique is how it matches and settles trades on the platform.

Rather than using an automated market maker system where users provide liquidity for others to trade against, the CoW Protocol matches buyers and sellers using multi-token batch auctions and settles trades at the best available price.

Batch auctions work by grouping together buy and sell orders every five minutes. Other users can then compete to provide the best order settlement for the batch of trades. This is referred to as “solving” and anyone who does this on the protocol is dubbed a “solver.”

Solving protects traders against miner extractable value (MEV) — the maximum value a miner can receive as a result of producing a block over and above the usual block reward and gas fees.

Because each batch of orders will most likely contain a range of different tokens – such as DAI/USDC, LINK/WETH or GNO/USDT – a method called ring trading is used to settle them. This means that rather than clearing trades based on matching identical trading pairs, liquidity can be sourced from any order in the batch to complete the transactions.

Safe

Safe (formerly Gnosis Safe) is customisable multisignature wallet infrastructure suitable for companies and individuals. It is a smart contract wallet on Ethereum that requires a prespecified minimum number of approvals in order for the transaction to occur.

For instance, a business that has four main stakeholders can set up a wallet that requires a minimum of three stakeholders to approve a transaction before it is sent.

This gives users an increased level of security and means if one stakeholder’s private key to the wallet is lost or compromised, the funds are not at risk and can be retrieved by the remaining stakeholders.

Safe supports Ether (ETH), ERC-20 tokens and ERC-721 (NFTs) and it can interact with several DeFi platforms.

Gnosis Chain and Gnosis Beacon Chain

Gnosis Chain is the associated execution-layer Ethereum Virtual Machine (EVM) chain and uses the xDAI stablecoin to facilitate transactions and pay for fees. The network itself is secured by the consensus layer, called the Gnosis Beacon Chain (GBC). The GBC uses a Proof-of-Stake system – similar to Cardano and Solana – whereby users lock up an amount of GNO to participate in the transaction validation process and thereby receive additional GNO tokens as a reward for helping to secure the network.

GnosisDAO

GnosisDAO is the collective steward of the Gnosis ecosystem, formed in late 2020. The GnosisDAO treasury has effective control of over 150K ETH and 3 million GNO tokens with 2.35 million GNO locked.

What are Gnosis digital assets?

GNO Token

Gnosis' native cryptocurrency is GNO, an Ethereum-based token that was sold during the Gnosis ICO. GNO tokens have a maximum supply of 3 million tokens.  It’s used for staking on the Gnosis Beacon Chain and acts as the governance token for the GnosisDAO.

How can I buy Gnosis tokens?

For those looking to incorporate Gnosis into their crypto portfolios, you will need to do so through a cryptocurrency exchange. Ensure that you only engage with reputable and regulated platforms, and always do due diligence before moving forward. Consult a financial advisor should you need more information.

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MKR, the governance token fueling the network, comes from the same platform that created DAI, the algorithmic stablecoin soft-pegged to the US dollar. MKR serves both the decentralised autonomous organisation, MakerDAO, and the software platform, Maker Protocol, both built on the Ethereum blockchain. These two platforms generate DAI and allow users to issue and manage the DAI stablecoin. 

What is Maker (MKR)?

Developed in 2015 and officially launched in December 2017, Maker is a revolutionary project that was built to host and generate DAI, a community-managed cryptocurrency that has its value soft pegged to the US dollar. The MakerDAO forms part of the larger Maker Protocol which allows DAI to maintain its value and operate without the need for a third party. The Maker Protocol requires both tokens to operate: DAI and MKR. 

To understand MKR, one must first be familiar with the DAI stablecoin. DAI serves as a loan option for borrowers, with the platform allowing users to take out a loan in DAI tokens by locking another cryptocurrency, such as ETH. When the borrower pays back the DAI that was borrowed, they are able to reclaim the collateral used for their loan. However, if its value drops below a predefined level it could automatically be sold off.

The Maker ecosystem is one of the first DeFi projects to enter the market, years before the movement took off. The DeFi sector revolves around providing decentralised financial products powered by smart contracts to the masses. 

Though the DAI stablecoin is best known as a service offered by the Maker Protocol, the MKR token is actually the crypto asset that secures changes to maintain its functioning. The governance token MKR gives holders voting rights over the Maker Protocol's development, such as what cryptocurrencies can be accepted as collateral and the price at which these assets will be sold if liquidation is to occur. The MKR price appreciates in value based on the success of DAI. 

The Maker protocol accepts a range of cryptocurrencies, including ETH, MANA, and BAT, as collateral.

Who created the Maker platform?

Established in 2015, the Maker Protocol was developed by a team of tech-savvy developers spearheaded by Rune Christensen. As time progressed, this collective eventually organised and formed into an official entity known as the Maker Foundation, a corporation located in the Cayman Islands.

In 2017, the Maker team raised a remarkable $12 million in funding by selling MKR tokens to some of the most influential venture capital firms at the time including Andreessen Horowitz, Polychain Capital, and 1Confirmation. A year later, another $15 million worth of MKR tokens were bought by Andreessen Horowitz, who expressed the intention to help govern the DAI system by participating in the MakerDAO. 

In 2019, the project raised another $27.5 million from venture firms Paradigm and Dragonfly Capital Partners for expansion to Asia. 

How does the Maker Protocol work?

When the Maker Protocol launched, 1 million MKR tokens were created. These tokens gave holders voting rights on key decisions through a process called Executive Voting.

First, the sentiment of MKR holders is measured on a new proposal through Proposal Polling before committing any changes to the software. The Executive Vote then takes place, and once the highest amount of MKR token holders commits to a proposal and the vote is passed, the winning proposal is implemented into the Maker Protocol. The number of tokens holds more president than the number of token holders, i.e. 10 holders with 1,000 tokens each will outvote 100 token holders with 50 tokens each. 

Non-MKR holders also have the opportunity to participate in the vote via threads in the MakerDAO forum however the MKR holders have the final say.

DAI Savings Rate

MKR holders also have a say in how much DAI holders can earn if they save DAI tokens on the platform, known as the DAI Savings Rate. In previous years this amount has varied between 0% and 8.75%. Following a recent market crash, MKR holders voted to make the DAI Savings Rate zero to encourage holders to sell their DAI and bring the price back into equilibrium.

When the DAI price drops below $1, MKR holders can vote to raise the DAI Savings Rate to encourage more users to hold DAI which increases the price.

What is MKR?

MKR is an ERC-20 token and acts as a governance and utility token to the Maker Protocol with no fixed supply. The token gains value as the use of the Maker Protocol increases as the supply is reduced when the Protocol is working effectively and increased when governed poorly. MKR tokens are created or destroyed through surplus auctions and debt auctions.

Surplus Auctions

The Maker system holds a Surplus Auction when the fees collected exceed an amount decided by MKR holders. DAI that surpasses this threshold must be purchased with MKR in order to settle the auction. This MKR is then destroyed reducing the total supply and thus increasing the token price.

Debt Auctions

Conversely, if the Maker system is underperforming its locked coins are sold for a lower value than before, causing it to raise capital via a Debt Auction. Through this process, new MKR tokens are created and auctioned for DAI. This in turn increases the MKR tokens and reduces the price. 

In this light, MKR holders are incentivised to keep the platform performing optimally in order for it to generate more fees and thereby reduce the MKR supply.

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