# Introduction

BakerDAO combines token economics, collateralized lending, leverage, and Proof-of-Liquidity into a single cohesive financial ecosystem. The `$BREAD` token features a mathematically-enforced upward price trajectory, backed by `$BERA` tokens.

This is a bonzi incubated by the core teams at [Kodiak Finance](https://x.com/KodiakFi) and [Yeet](https://x.com/eatsleepyeet), and in collaboration with [OlympusDAO](https://x.com/OlympusDAO). 

Here's a quick explainer of Baker DAO:

* Users bake `$BREAD` by depositing `$BERA`
* Users can burn `$BREAD`, to redeem `$BERA`
* Users can take `$BERA` loans against their `$BREAD` at `99%` LTV and access leverage
* There will be whitelisted pre-deposit vaults for users to deposit `$BERA`, and mint `$BREAD` at the same price as other depositors in same vault
* The baking and burning bonding curve ensures that `$BREAD` always rises against `$BERA` regardless of user behaviour
* The initial supply of `$BREAD` will be determined by how much `$BERA` is deposited in the pre-deposit vaults. The initial max cap of `$BREAD` will be `6.9 million`. After that, the supply will be dynamic and the cap is adjusted each week.

{% hint style="info" %}
Due to the nature of the mechanism, the max loss a participant can incur in $BERA by participating is 5.38%: from the 2.69% minting and burning fees respectively. If a participant is not the last user to ever mint $BREAD their max loss is less than 5.38%.
{% endhint %}