Sky Protocol Launches SKY Token Replacing MKR for Governance

Sky Protocol, formerly known as MakerDAO, has announced a significant shift in its decentralized finance (DeFi) ecosystem with the launch of the SKY token. This new token is set to become the exclusive governance asset for the Sky Protocol ecosystem, replacing the MKR token, which has been retired from all governance responsibilities. Current holders of MKR tokens are urged to upgrade their holdings to SKY to maintain their influence and benefits within the ecosystem, as the MKR token is set to become obsolete.

This transition represents a comprehensive overhaul of the governance model, moving from a Web2-based system to a Web3-designed framework. The new governance system aims to enable totally decentralized decision-making by a community of nearly 6,000 Sky Protocol token holders. The SKY token offers greater accessibility and flexibility to users, incentivizing long-term performance by linking governance directly to the protocol's success.

Holders of the SKY governance token will have the right to vote on protocol changes and influence the development direction of Sky Protocol. The upgrade rate is set at 1 MKR = 24,000 SKY, reflecting the protocol’s aim to expand its community and governance participation. To encourage a swift transition, Sky Protocol has implemented a penalty mechanism. Starting from September 18, 2025, holders of MKR who have not upgraded to SKY will face a devaluation in their conversion rates, receiving 0.78 SKY tokens for every MKR converted, instead of the standard 1.0 SKY tokens.

Individuals who complete the upgrade before the deadline will receive the full 24,000 SKY tokens for each MKR and enjoy uninterrupted governance and staking benefits. Those who upgrade after the deadline may experience reduced governance power and fewer opportunities to earn rewards, emphasizing the importance of upgrading promptly. The Sky Staking Engine, a new rewards system, allows users to earn returns based on the protocol's performance. This system aligns community incentives with long-term growth, offering a performance-based model where returns are influenced by the protocol's productivity and overall economic health.

The Sky Staking Engine is designed to empower token holders with a stake in the protocol's outcomes, shifting from governance by the few to governance by the many. This transition marks a crucial moment for the DeFi sector, with Sky Protocol now poised to facilitate a new era of decentralized coordination and rewards. For MKR holders, the message is clear: upgrade to SKY immediately to maintain influence over the future of Sky Protocol and avoid potential penalties come September 18. The Shapeshift Foundation, overseeing Sky Protocol, has emphasized the importance of this upgrade for engaging with the newly transformed DeFi ecosystem.