Describe how the mechanism implemented in MakerDAO’s smart contract MakerVault allows crypto investors to hedge their crypto-investment.

Firstly, an investor could hedge against the volatile market. If a ERC20 token increased in price, the investor could transform a part of his ‘profit’ into DAI (pegged to USD) and therefore can hedge against the volatile market. Secondly, the DAI could be locked into a savings contract (DSR). In this savings contract you earn an interest rate, which partially hedges against the stability fee which applies in the Makervault.