Sky, a decentralized finance platform, has proposed replacing the Maker (MKR) governance token with its own SKY token as part of a major upgrade to the system. This proposal aims to introduce staking and other incentive features to the protocol.
Sky’s One-Way Switch from MKR to SKY
Sky published the proposal on May 1 through its DAO forum. The suggestion includes eliminating the option to switch back from SKY to MKR. The change is expected to take place between May 15 and May 19, ending support for MKR in the protocol. Rune Christensen, Sky’s co-founder, described this move as a “huge milestone” and believes it will accelerate the adoption of SKY by exchanges.
“This change will allow exchanges to fully support SKY without concerns about liquidity fragmentation,” Christensen explained.
Penalties for Delayed Upgrades
The proposal also includes penalties for MKR holders who delay the upgrade. Starting September 18, anyone who switches late from MKR to SKY will face a 1% penalty. This penalty will increase every three months, and users who delay will receive fewer SKY tokens.
SKY Staking and Rewards Coming Soon
A major change in the proposal is the introduction of SKY staking. Christensen mentioned that the upgrade would unlock staking rewards, which will be funded by income from Sky’s USDS stablecoin. These rewards are expected to begin two to three weeks after the governance contract upgrade.
“This is the final step before Sky reaches zero fixed costs by late 2025,” Christensen added, noting that the protocol will allocate more income to SKY buybacks and staking rewards.
Temporary Suspension of Liquidations During the Transition
To minimize risks from market manipulation, Sky will pause SKY liquidations during the early phase of the token transition. Once liquidity in the market is stable, Sky Governance will resume liquidations and adjust risk settings accordingly.
Sky Branding Gains Support from the Community
In August 2024, Maker rebranded to Sky. Although this decision initially caused some confusion, a poll in November revealed that 79% of tokenholders preferred to keep the Sky name. Moving forward, Sky will maintain its new identity as the official name for the protocol.
MKR Price Rises Despite Transition Plans
Although Sky plans to phase out Maker (MKR) in favor of the SKY token, MKR’s price still saw a slight increase in the last 24 hours. This price increase indicates investor confidence in the protocol’s roadmap and potential rewards from the upcoming transition.
What’s Next for Sky?
With staking rewards on the horizon, penalty-driven incentives for the migration, and the final step of replacing MKR, Sky is set to enter the next phase of decentralized governance. As it moves toward a no-fixed-cost model, the focus now is on how these changes will impact SKY’s long-term value and the protocol’s resilience.
