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Maker (MKR), the governance token of the decentralized finance (DeFi) lending platform MakerDAO with a total value of $5.3 billion, experienced a significant surge in price on Friday as it reached its highest value in almost a year. This remarkable price increase was driven by the recent launch of a token buyback program.
MKR experienced a brief surge above $1,200 in the early hours of Friday, marking the first time since last August that it reached such heights. However, it later retraced some of its gains and settled at approximately $1,148. Impressively, the token has witnessed a remarkable 28% increase over the past week, vastly outperforming the CoinDesk Market Index, which recorded a 4.6% decline and tracks the overall performance of the cryptocurrency market.
The price action unfolded when the lending protocol initiated a token buyback program on Wednesday, leading to the removal of MKR supply from the market. This initiative, known as the Smart Burn Engine, is designed to regularly allocate surplus DAI stablecoins from Maker's reserve to acquire MKR tokens from a UniSwap pool, as outlined in a governance proposal.
The program was deployed earlier this month and went live on Wednesday, once the surplus buffer surpassed $50 million.
Over the past 24 hours, as per blockchain data from Etherscan, the protocol has successfully repurchased approximately $230,000 worth of MKR tokens. At this rate, it is projected that the protocol will acquire around $7 million worth of tokens in the upcoming month.
The buyback program, conducted at current prices, will steadily reduce 0.7% of the token's circulating supply each month, with its total market capitalization being approximately $1 billion.
Maker stands tall among the vast and long-standing DeFi lending protocols, boasting the issuance of the impressive $4.6 billion DAI stablecoin. This platform operates under the guidance of a decentralized autonomous organization (DAO), wherein MKR holders actively participate in voting on essential governance proposals.
The protocol has been progressively allocating DAI's reserve assets into conventional investment instruments, like bank loans and government bonds, in order to generate revenue from yields. Additionally, MakerDAO is currently undergoing a significant revamp, which involves upgrading the DAI and MKR tokens, as well as decentralizing its structure into smaller, autonomous entities known as SubDAOs, granting them the capability to issue their own tokens.
