How does governance work in MakerDAO and what role do MKR holders play in it?

The MakerDAO governance system is designed to ensure that the Maker Protocol remains stable and secure.

The governance system is composed of MKR holders, who are responsible for making decisions about the protocol. MKR holders are responsible for voting on proposals that affect the Maker Protocol, such as changes to the collateral requirements or risk parameters. MKR holders can also vote on proposals to add new collateral types or create new Dai Savings Rates (DSRs).

All decisions made by MKR holders must be approved by a majority of votes in order to be implemented. MKR holders also have the ability to delegate their voting power to other MKR holders, allowing them to participate in governance without having to cast their own votes. This allows MKR holders who may not have the time or expertise to make informed decisions about the protocol to still have a say in its future.

In addition, MKR holders are responsible for maintaining the stability of Dai, which is done through a process called “stability fees”. Stability fees are charged when users borrow Dai and are used to incentivize users to pay back their loans on time and in full. This helps maintain the value of Dai and ensures that it remains stable over time.

Overall, MKR holders play an important role in governing the Maker Protocol and ensuring its stability and security. By voting on proposals and maintaining Dai’s stability through stability fees, they help ensure that MakerDAO remains a reliable platform for users around the world.