Makerdao tried to keep the system (DAI) decentralized. but how? to do so they need crypto asset for collateralization rather than fiats and at first they introduced SCD (Single-Collateral Dai) which only ETH was excepted as a collateral. but the problem with eth is price volatility which makes it hard to keep 1:1 ratio for DAI. to solve this problem , Makerdao came up with Over - collateralization solution with the ratio of 1:1.5. it means if you wanna mint 100 $ DAI by the system you have to back it with at least 150$ ETH. now you collateral 150 $ ETH and Got 100$ DAI and you just spend your 100 DAI. but after minting 100 DAI what happen to your collateral which is 150$ ETH? the rest of your money is going to be treated like a tradable position by the name of CDP or Collateralized Debt Positions. now imagine the price of ETH skyrackets and its price is double. now the 150$ ETH which you locked as a collateral is worth 300$. what happened ? its like a leverage position. you spend your own 100 DAI and rest of original money is 50$ but the collateral worth 300$ which 100$ is for spent DAI and 200$ is left for you. now your 50$ which you paid more for over Over - collateralization is worth 200$. its like a 2X leverage position. (but the ratio is totally dependent to eth price) if you like just ask me to explain about what happen when ETH price goes down and how Maker Protocol Auctions is going to Liquidate your money. lets not forget that now the MakerDao is Multi-Collateral Dai (MCD) system. it means any token on Ethereum is accepted as a collateral.

Makerdao tried to keep the system (DAI) decentralized. but how? to do so they need crypto asset for collateralization rather than fiats and at first they introduced SCD (Single-Collateral Dai) which only ETH was excepted as a collateral. but the problem with eth is price volatility which makes it hard to keep 1:1 ratio for DAI. to solve this problem , Makerdao came up with Over - collateralization solution with the ratio of 1:1.5. it means if you wanna mint 100 $ DAI by the system you have to back it with at least 150$ ETH. now you collateral 150 $ ETH and Got 100$ DAI and you just spend your 100 DAI. but after minting 100 DAI what happen to your collateral which is 150$ ETH? the rest of your money is going to be treated like a tradable position by the name of CDP or Collateralized Debt Positions. now imagine the price of ETH skyrackets and its price is double. now the 150$ ETH which you locked as a collateral is worth 300$. what happened ? its like a leverage position. you spend your own 100 DAI and rest of original money is 50$ but the collateral worth 300$ which 100$ is for spent DAI and 200$ is left for you. now your 50$ which you paid more for over Over - collateralization is worth 200$. its like a 2X leverage position. (but the ratio is totally dependent to eth price) if you like just ask me to explain about what happen when ETH price goes down and how Maker Protocol Auctions is going to Liquidate your money. lets not forget that now the MakerDao is Multi-Collateral Dai (MCD) system. it means any token on Ethereum is accepted as a collateral.