The stable Dai token which has 1:1 parity with the US dollar, MKR, which enables control over how the total supply of DAI is managed via decentralized governance. MKR provides participants in the Maker system an incentive to behave appropriately. As part of this incentive scheme, MKR will be subject to profit-loss dynamics that push its price towards that of oracle curation markets like Augur or TruthCoin where users are willing to pay a spread to have access to accurate information.
Maker is an autonomous system that doesn't rely on its creators for funding or survival. MKR tokens are "burned" when used in collateralized debt positions (CDPs), resulting in the elimination of MKR from the total supply over time, rather than mining like Bitcoin or Ethereum's model. Those who create Dai must pay down payment and continuous stability fees that are collected by the smart contract platform Maker to compensate participants who provide stability for Dai if they prove unworthy (or, less politely stated, if they fail). The CDPs need to be continually tended to with up-to-date collateral values as well as their associated fee structures; this ensures there is at all times a strong incentive for honest actors to tend to the system and that it remains decentralized.
Those who do not perform well or who maliciously attack the Maker system by repudiating their debts or acting in bad faith will be penalized through a slashing mechanism and will lose their deposits, if they have consistently acted in prejudice of stability and accuracy of information on the Maker platform at large. Failure to maintain CDPs properly means failing to follow risk management policies which are set out up front by Maker's governance structure along with its artificial intelligence engine known as Lord Kelvin. As long as the global pool of active users is sufficiently large, Dai should remain stable regardless of how many pooled resources are leveraged against it. The purpose of setting collateral levels upon CDP creation is to protect the Dai collateral supply from being catastrophically liquidated in an extremely unlikely but still possible black swan event, where the value of all Ether on Maker goes to zero.
The goal of this system is to provide a decentralized stablecoin that has an algorithmic central bank without counterparty risk at a scale that can compete with traditional financial instruments. This means no trusted setup which means that if something was not done right it will be obvious through cross-examination by market participants. No vulnerability to unknown actors which reduces trust and reliance on institutions. If something was not done correctly it would be immediately apparent because you need 51% of people working toward a common goal in order for everyone else to remain safe. It also ensures total decentralization of the system, unlike many other stablecoins like Basis (which is run by a single issuer) or Havven (which now has KYC requirements for participation). Maker users maintain their own collateral through deposits; this also ensures that they are incentivized to act in accordance with the safety and stability of the platform.
A continuous contribution auction issues 5% new MKR tokens every year on an ongoing basis. This creates an incentive for MKR holders to govern the system well because bad governance leads to token dilution which means less control of the network. A high level of participation in voting will lead to more influence over decisions regarding the system.
The maximum MKR token supply is 2,793,831. There are currently 756,097 tokens in circulation with a market capitalization of around $523 million according to CoinMarketCap on September 5th, 2018.
