How Does MakerDAO Manage Different Collateral Types? ⎊ Path

How Does MakerDAO Manage Different Collateral Types?

MakerDAO manages different collateral types by assigning each a specific set of risk parameters, which are determined by MKR governance token holders. These parameters include a unique minimum collateralization ratio, a stability fee, and a liquidation ratio.

This allows the protocol to accept a diverse portfolio of volatile assets (like ETH, wBTC, etc.) while ring-fencing the risk associated with each. If one collateral type suffers a severe price drop, the liquidation mechanism is triggered for only those vaults.

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Glossar

Different Collateral Types

Type ⎊ Different collateral types refer to the diverse range of assets accepted to secure financial positions in decentralized finance and derivatives markets.

MakerDAO

Governance ⎊ The MakerDAO protocol, at its core, represents a decentralized autonomous organization (DAO) governing the creation and stability of DAI, a cryptocurrency pegged to the US dollar.