Sky, a decentralized finance (DeFi) lending platform, is on the verge of a major upgrade that could drastically alter its governance structure and token ecosystem. The project has proposed a significant change in which the Sky (SKY) token would replace the Maker (MKR) token as the protocol's governance token. This proposal was submitted on May 1 to Sky's decentralized autonomous organization (DAO) forum.

Rune Christensen, the co-founder of Sky, has expressed his full support for the proposal, calling it a "huge milestone." He believes that this change will be instrumental in facilitating the adoption of the SKY token by exchanges, as it eliminates the ability for users to downgrade from SKY back to MKR. Christensen highlighted that this change would address a key limitation that has hindered exchanges from embracing SKY due to concerns about liquidity fragmentation.

In addition to the token swap proposal, Sky has also introduced penalties for MKR holders who are slow to switch to SKY. According to the proposal, a 1% delayed upgrade penalty will be imposed on all MKR to SKY conversions starting September 18, with the penalty increasing every three months. Users who incur this penalty will receive fewer SKY tokens in exchange for their MKR holdings.

One of the most significant aspects of the proposed upgrade is the introduction of SKY staking. Christensen emphasized that enabling staking for SKY tokens is a crucial step in the protocol's evolution. Following the governance contract upgrade, rewards for the decentralized stablecoin USDS, which are based on the income generated by the Sky Protocol, will be enabled with a splitter rate of 50%.

Moreover, as part of the upgrade, SKY liquidations will be temporarily paused to mitigate the risk of price manipulation during the transition period from MKR to SKY. Once market liquidity for SKY is restored, Sky Governance will lift the liquidation freeze and adjust risk parameters to long-term targets.

Sky, formerly known as Maker, underwent a rebranding in August of last year. While there was some confusion and negative feedback initially, a poll conducted in November showed that 79% of tokenholders favored retaining the Sky brand as the protocol's backend name without any further changes.

The proposed upgrade represents a significant step forward for Sky as it seeks to enhance its governance structure, token economics, and overall functionality. If accepted by the DAO, these changes could have far-reaching implications for the platform's future development and growth within the DeFi

Source: https://cointelegraph.com/news/sky-pitches-ousting-maker-token-completing-upgrade?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound