- Sky proposed finalizing the migration of its governance token from MKR to SKY.
- Under the proposed plan, MKR holders would be encouraged to swap their tokens for SKY at a fixed rate, marking the beginning of a new governance era.
Sky, the decentralized finance platform formerly known as Maker, is moving closer to completing its transition by retiring the MKR token and fully adopting SKY as its new governance token. A proposal outlining the final steps of this change was shared on the Sky DAO forum on May 1. The plan includes introducing staking for SKY and permanently disabling the option to convert SKY back to MKR.
If the community approves the proposal, the migration will take place between May 15 and 19. Sky co-founder Rune Christensen stated, “This is a huge milestone. I fully support the proposal from Atlas Axis to finalize the upgrade from MKR to SKY, and it is great to see them taking the lead on proposing larger-scale upgrades to the system like this.”
New Smart Contract Requirements for Upgrade
To speed up adoption, the proposal includes a penalty for users who delay their token swap. Starting on September 18, any MKR holders converting late will face a 1% penalty, which will increase every quarter. As a result, these users will receive fewer SKY tokens.
According to the proposal, a new smart contract must be deployed to facilitate the upcoming token upgrade from MKR to SKY, and it must meet several important criteria to ensure a secure and efficient transition. One of the primary features outlined is that it must allow users to upgrade from MKR to SKY at a fixed rate of 1 MKR to 24,000 SKY, with a penalty applied for late conversions.
This conversion mechanism establishes a clear and consistent exchange rate while incorporating a system of accountability for delayed participation. Additionally, the contract must strictly prohibit any conversions from SKY back to MKR, thereby solidifying the one-way nature of the migration and preventing any potential reversal that could undermine the integrity of the governance model.
Also, it must include support for applying a Delayed Upgrade Penalty, which will be controlled by Sky Governance. As a starting point, the proposal specifies that the delayed upgrade penalty will initially be set to 0%, allowing users a grace period to complete their conversions without incurring any reductions in token value.
Staking will be a central feature of the updated system. Rewards tied to USDS, Sky’s native stablecoin, will launch two to three weeks after the contract is live. Half of the protocol’s total revenue will be distributed to SKY stakers. “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,” Christensen commented.
While there was some uncertainty within the community when Maker rebranded to Sky last year, a governance vote in November settled the matter. Nearly 79% of voters supported keeping the Sky branding, signaling strong approval for the new identity. In comparison, just over 18% favored a limited rebrand that retained elements of the MakerDAO name, while only 2.2% voted to fully revert to the original branding.
