Nikolas Sargeant
Sky Protocol is moving to finalize its complete transition from the Maker (MKR) token to its native SKY token, marking a major milestone in its decentralized finance (DeFi) roadmap. A new proposal posted on May 1 to Sky's decentralized autonomous organization (DAO) outlines the final steps to sunset MKR and enable full SKY governance.
If approved, the token switch will be implemented between May 15 and May 19. After this window, reverse conversions—downgrading from SKY back to MKR—will no longer be allowed.
Rune Christensen, Sky co-founder, praised the proposal as a “huge milestone” and a move that could accelerate exchange adoption. He noted that allowing downgrades back to MKR has previously discouraged platforms from embracing SKY due to liquidity concerns.
To encourage timely migration, the proposal includes a delayed upgrade penalty. Starting September 18, users converting MKR to SKY will face a 1% penalty, which will increase quarterly. Additionally, users who delay upgrading will receive fewer SKY tokens.
SKY Staking Launches Alongside Temporary Liquidation Freeze
A key feature of this transition is the rollout of SKY staking, which will unlock additional rewards tied to Sky’s native decentralized stablecoin, USDS. Staking rewards, based on protocol income, will activate roughly two to three weeks after the new governance contract is deployed, with an initial 50% income split toward stakers.
Christensen emphasized that the finalization of the token upgrade sets the stage for Sky’s goal of reaching zero fixed costs by late 2025. This shift aims to channel more protocol income into SKY buybacks and staking rewards.
As a precaution, all liquidations will be temporarily paused during the early phase of the MKR-to-SKY transition to mitigate price manipulation risks. Once SKY liquidity stabilizes, the protocol will resume normal liquidation operations and long-term risk parameters.
Sky rebranded from Maker in August 2024. Despite early confusion and debate about reverting to the original name, a DAO poll in November saw 79% of voters choose to stick with the Sky brand.
