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Decentralized finance (DeFi) platform Sky has unveiled a proposal aimed at finalizing its transition from the Maker protocol. The plan involves replacing the Maker (MKR) governance token with the Sky (SKY) token and introducing staking capabilities, a move that could significantly reshape the platform's governance and user engagement.
Key Takeaways
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Sky proposes to replace Maker (MKR) with Sky (SKY) as the governance token.
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The transition is expected to occur between May 15 and May 19, 2025.
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A penalty system for delayed upgrades from MKR to SKY is proposed.
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Staking for SKY tokens will be enabled post-upgrade, enhancing user rewards.
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Temporary pauses on liquidations will be implemented during the transition.
Proposal Details
On May 1, 2025, Sky's proposal was posted on its decentralized autonomous organization (DAO) forum, outlining the need for a governance token overhaul. If approved, the transition from MKR to SKY is set to occur within a two-week window, with a complete halt on downgrading from SKY back to MKR.
Sky co-founder Rune Christensen emphasized the significance of this change, describing it as a "huge milestone" for the platform. He noted that the current ability to downgrade from SKY to MKR has hindered exchanges from fully adopting the SKY token, creating liquidity concerns.
Penalty for Delayed Upgrades
To encourage a swift transition, the proposal includes a penalty for MKR holders who delay their upgrade to SKY. Starting September 18, 2025, a 1% penalty will be imposed on all MKR to SKY upgrades, increasing every three months. This penalty will also result in fewer SKY tokens being awarded to those who delay.
Staking and Rewards
One of the most anticipated features of the upgrade is the introduction of staking for SKY tokens. Christensen stated that rewards for the decentralized stablecoin, USDS, will be based on the income generated by the Sky Protocol. These rewards are expected to be enabled two to three weeks after the governance contract upgrade, with a 50% splitter rate for distribution.
Temporary Liquidation Pause
As part of the transition, liquidations of SKY tokens will be temporarily paused to mitigate risks associated with price manipulation during the upgrade process. Christensen assured users that once market liquidity for SKY is restored, the governance will lift the liquidation freeze and adjust risk parameters to align with long-term targets.
Background on Sky and Maker
Sky, which rebranded from Maker in August 2024, faced challenges with user confusion and negative feedback regarding the name change. However, a subsequent poll revealed that 79% of token holders preferred to retain the Sky brand, leading to the current proposal aimed at solidifying the platform's future.
This proposed overhaul marks a pivotal moment for Sky as it seeks to enhance its governance structure and user engagement through innovative features like staking and a streamlined token transition. The outcome of the DAO vote will be crucial in determining the future direction of the platform and its community.
Sources
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Sky pitches ousting Maker token, enabling staking, to complete upgrade, StartupNews.fyi.
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Sky pitches ousting Maker token to complete upgrade, Cointelegraph.
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