Thread by @w3g_io

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MakerDAO launched 1,000,000 MKR tokens at its inception, but 991,328 is its current maximum total supply according to @etherscan.

The +8.000 MKR "missing" are really burned! 🔥

Why is MKR supply dynamic and how does it work? It's time for a thread! 👇

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✊ MKR is the governance token of MakerDAO. Its main functionality is to be used as vote power to approve or reject improvements and changes to the Maker ecosystem. But, actually there is another reason why MKR exists.

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🤝 The token also acts as a source of incentives to govern the system well. This is because its supply can change according to the situations presented by the Maker protocol.

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Bad decisions result in bad outcomes, when this happens MKR supply may expand. On the other hand, good outcomes can reduce MKR supply.

📉 When supply is up, MKR value goes down.

📈 When supply is down, MKR value goes up.

So, let's take good decisions plz.

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🤔 How does it work?

First of all, we all need to know that the Maker protocol is based on debt.

👍 Good debt = we got enough collateral and the system is healthy.

👎 Bad debt = we got a deficit and the system needs more money to keep all safe.

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🖨️When the Maker Protocol is running a deficit and the system debt exceeds a maximum threshold, MKR is created and auctioned for Dai in order to recapitalize the system.

🖨️ Bad decisions = bad debt = deficit = MKR goes brrrr.

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🔥 MKR is destroyed when the Maker Protocol’s system surplus exceeds a minimum threshold, resulting in excess Dai being auctioned for MKR that is then destroyed.

🔥 Good decisions = good debt = surplus = MKR goes on fireeee!!

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🔥🔥🔥 At the moment, 8,671.62 MKR have been burned and the current supply is below initial supply. Good job governance! 👏

Thanks to makerburn.com for the data.

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🎯 In the same vein, at present, the surplus buffer needs to reach 60 million DAI to fully burn MKR.

📊 At current rates, the system surplus buffer would reach that goal in 91 days according to makerburn.com.

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💰 Surplus buffer is a place where all DAI from stability fees (fees from DAI minted as debt) are accrued. When debts are running well, the system surplus buffer gets bigger, and when it reaches the goal the exceeding amount will be used for buying MKR and burning it.

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🤓 Lesson recap: whenever the Maker Protocol makes money in DAI (good debt), MKR is bought and burnt. Likewise, every time the system loses money (bad debt), it mints MKR, sells it, and buys DAI to recapitalize the system.

What about you? Would you like to see MKR tokens going up in flames or not? Anyway, you can always propose a change in governance, don't forget it! 👇