MakerDAO is a decentralized protocol that issues DAI, a stablecoin pegged to $1. Users deposit crypto collateral into Vaults and can borrow DAI against it. The system maintains the peg through over-collateralization (you must deposit more collateral than DAI borrowed), liquidations when collateral values drop, and interest rate adjustments via stability fees and the DSR.

DAI is one of the most battle-tested stablecoins, operating since 2017. Risks include smart contract vulnerabilities, mass liquidations during extreme volatility (like March 2020), oracle failures, and governance attacks. DAI also has exposure to centralized stablecoins like USDC in its collateral, reducing pure decentralization.

The DSR is a yield you earn by depositing DAI into Maker's savings contract. The rate is set by MKR governance and is funded by stability fees paid by vault owners. There's no minimum deposit, no lockup, and you can withdraw anytime. It's essentially a risk-free rate within the Maker ecosystem.

If your vault's collateral ratio falls below the liquidation threshold, anyone can trigger liquidation. Your collateral is auctioned to cover your DAI debt plus a liquidation penalty (typically 13%). Any remaining collateral is returned to you. Monitor your vault's health and add collateral or repay DAI when ratios get tight.

Endgame is Maker's long-term plan to evolve into a more resilient protocol. It includes rebranding DAI to USDS and MKR to SKY, creating SubDAOs for different functions, expanding RWA exposure, and potentially launching a dedicated blockchain. The transition is gradual, with both old and new tokens remaining usable.