Sky Protocol Completes Upgrade: SKY Token Takes Center Stage

The decentralized finance (DeFi) lending platform, formerly known as Maker, has officially finalized its transition to Sky Protocol. This significant upgrade marks the complete replacement of the Maker (MKR) governance token with the Sky (SKY) token, along with the highly anticipated launch of SKY staking. The proposal, passed by the Sky DAO, ensures a smoother transition and better adoption by exchanges.

This strategic shift, effective around May 15th-19th, eliminates the ability to downgrade from SKY to MKR, addressing concerns regarding liquidity fragmentation. Sky co-founder Rune Christensen highlighted this move as a crucial step in simplifying the platform and attracting greater exchange integration.

The transition also includes a phased introduction of penalties for MKR holders who delay upgrading to SKY. Beginning September 18th, a 1% penalty will apply, escalating quarterly, affecting both the number of SKY tokens received and overall rewards.

SKY Staking and USDS Rewards

One of the most significant aspects of this upgrade is the introduction of SKY staking. This functionality, coupled with rewards derived from the protocol’s decentralized stablecoin, USDS, significantly boosts user engagement and participation. Christensen noted that the USDS rewards, distributed at a 50% splitter rate, will be activated within a few weeks post-upgrade.

Christensen further elaborated that the successful completion of this upgrade paves the way for Sky Protocol to achieve zero fixed costs by the end of 2025, maximizing resources for SKY buybacks and staking rewards. To minimize risks during this transitional period, SKY liquidations have been temporarily paused, preventing potential price manipulation.

This development follows a previous community vote that decisively supported retaining the ‘Sky’ branding, marking the end of an earlier period of uncertainty surrounding the platform’s identity. The full transition underscores Sky Protocol’s commitment to enhancing its platform’s functionality and user experience.

Related: Sky Doubles Down on Token Overhaul