Sky DAO Considers Ending MKR Token Support and Introducing Delayed Upgrade Penalties
Sky, the decentralized finance lending platform formerly known as Maker, has proposed measures to complete its transition by replacing the Maker (MKR) governance token with the Sky (SKY) token. The proposal was posted to the Sky DAO forum on May 1.
If approved by the DAO, the change would occur between May 15 and May 19. The proposal would also disable the ability to downgrade from SKY back to MKR tokens, a feature that has been available during the transition period.
Sky co-founder Rune Christensen expressed strong support for the proposal, calling it a "huge milestone." He noted that allowing users to downgrade from SKY to MKR has been a "key limiting factor preventing exchanges from adopting SKY."
The proposal includes penalties for MKR holders who delay upgrading to SKY tokens. Starting September 18, a 1% delayed upgrade penalty would apply to all MKR to SKY conversions, with penalties increasing every three months. Users affected by these penalties would receive fewer SKY tokens when they eventually upgrade.
An important component of the proposed changes is enabling SKY staking. Rewards for USDS, Sky's decentralized stablecoin, would be activated two to three weeks after the governance contract upgrade, with a splitter rate of 50%.
The plan also includes a temporary pause on SKY liquidations during the early stages of the one-way MKR to SKY transition. Christensen explained this is necessary to prevent risks from price manipulation while the transition is taking place.
Sky rebranded from Maker in August last year. Despite initial confusion and negative feedback that led Christensen to consider reverting to the Maker name, a November poll showed 79% of tokenholders voted to keep the Sky brand as the protocol's identity.
The Sky transition comes as restaking technology gains traction in DeFi, with major liquid restaking protocols now holding over $12 billion in total value locked according to DefiLlama. The approach enables validators to secure multiple protocols with already-staked assets, creating modular security that could help address institutional concerns about risk management in decentralized systems.
