Decentralized finance (DeFi) lending platform Sky has pitched a proposal to finalize its upgrade from Maker by replacing its governance token and enabling staking.
The proposal, posted on May 1 to Sky’s decentralized autonomous organization (DAO) forum, would see the Sky (SKY) token take over the Maker (MKR) token as the protocol’s governance token.
If the DAO accepts, the change would be slated to take place around May 15 to May 19 and downgrading from SKY to MKR would also be disabled.
Sky co-founder Rune Christensen said in response to the proposal that it was a “huge milestone,” which he “fully supports,” and laments that allowing users to downgrade from SKY back to MKR has been a “key limiting factor preventing exchanges from adopting SKY.”
“With this change, exchanges are likely to move faster in quickly adopting SKY without concerns about fracturing liquidity,” he said.
Penalties on MKR holders who are slow in switching to SKY have also been proposed.
According to the proposal, a 1% delayed upgrade penalty would apply to all MKR to SKY upgrades starting Sept. 18, increasing every three months. Users hit with a delayed upgrade penalty will also obtain fewer SKY tokens.
Sky staking, temporary pause on liquidations
Christensen said the most important change would be to see SKY staking enabled as part of the changes to the protocol.
Rewards for its decentralized stablecoin, USDS, which are based on the income the Sky Protocol generates, will be enabled two or three weeks after the upgrade of the governance contract, with a splitter rate of 50%, according to Christensen.
“Getting past the full upgrade of MKR to SKY is one of the last pieces missing before Sky can transition to 0 fixed costs at the end of 2025, which will ensure an even greater portion of the income the protocol generates goes to the benefit of SKY buybacks, or SKY Staking Rewards,” he said.
SKY liquidations will also be temporarily disabled while the one-way MKR to SKY transition is still in its early stages.
Related: Sky doubles down on token overhaul: Making MKR unusable, launching subDAOs
“This is necessary to prevent risk from price manipulation to the SKY and MKR price while the transition is happening,” Christensen said.
“When SKY market liquidity is restored, Sky Governance will lift the liquidation freeze and move risk parameters to long-term targets,” he added.
Maker rebranded to Sky in August last year but after confusion and negative feedback, Christensen considered going back to the original Maker name just months later.
However, a November poll saw 79% of tokenholders vote to keep the Sky brand as the back end protocol brand with no further changes.
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