Sky Moves to Replace MKR Token with SKY Governance Coin

Jose Gustavo
Sky Moves to Replace MKR Token with SKY Governance Coin

Decentralized finance platform Sky has introduced a bold proposal to replace the Maker (MKR) governance token with its SKY token. This move aims to complete the long-awaited upgrade and push forward staking and incentive features within the protocol.

Sky Plans One-Way Switch from MKR to SKY

Sky’s proposal, published on May 1 via its DAO forum, suggests removing the ability to downgrade from SKY back to MKR. The switch could begin between May 15 and May 19, ending support for MKR in the protocol. Sky co-founder Rune Christensen called the move a “huge milestone” and said it would speed up exchange adoption of SKY.

“This will allow exchanges to fully support SKY without worrying about splitting liquidity,” Christensen said.

Delayed Upgrades Will Face Penalties

The proposal includes a penalty system for MKR holders who delay the upgrade. Starting September 18, a 1% penalty will apply to all late MKR-to-SKY conversions. The penalty will increase every three months, and users who delay will receive fewer SKY tokens.

SKY Staking and Rewards Coming Soon

One of the biggest changes involves SKY staking. According to Christensen, the upgrade will unlock staking rewards funded by income from Sky’s USDS stablecoin. These rewards will start two or three weeks after the governance contract upgrade.

“This is the final step before Sky reaches zero fixed costs by late 2025,” Christensen noted. “It means more income will go to SKY buybacks and staking rewards.”

Temporary Pause on Liquidations During Transition

To avoid risks from market manipulation, SKY liquidations will be paused during the early phase of the token switch. Sky Governance will restore liquidations and adjust risk settings once market liquidity stabilizes.

Community Supports Sky Branding

Sky, previously known as Maker, rebranded in August 2024. While early feedback caused some confusion, a community poll in November showed 79% of tokenholders support keeping the Sky brand. The new identity will remain the official name for the protocol moving forward.

MKR Price Rises Despite Sky’s Proposal to Phase It Out

Despite the bold proposal from Sky to phase out Maker (MKR) in favor of the SKY token, the price of MKR still increased slightly over the past 24 hours. This uptick reflects investor confidence in the protocol’s roadmap and potential future rewards tied to the transition.

What’s Next for Sky?

With staking on the horizon, penalty-driven migration incentives, and the final step of replacing MKR, Sky is positioning itself to fully unlock its next phase of decentralized governance. As it shifts toward a no-fixed-cost model, all eyes are on how this strategic evolution will affect SKY’s long-term value and protocol resilience.

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