Sky (SKY)

Sky (SKY) is the governance token of the Sky protocol, the system formerly known as MakerDAO, which issues the stablecoins USDS and DAI. SKY holders vote on the protocol's risk settings, interest rates and collateral, and can stake their tokens to earn a share of its income. SKY replaced Maker's original governance token, MKR, at a fixed rate of 24,000 SKY for each MKR, and since May 2025 it has been the protocol's only governance token.

SKY is the volatile governance token, while USDS and DAI are designed to stay at one dollar. The protocol is one of the oldest in decentralized finance, and its decisions are made by token-holder vote, a form of decentralized autonomous organization.

Think of Sky as a pawnshop run by its customers. People leave valuables, such as crypto, as security and borrow digital dollars against them. The shop also invests some of its reserves in safe assets like government bills, and it earns money from the interest borrowers pay.

SKY is the token that makes someone a part-owner with a vote. Holders decide how much the shop charges, which valuables it accepts and how much to pay savers. When the shop does well, part of the profit is used to buy SKY back and to reward holders who lock their tokens away. When it makes bad loans, SKY holders are the ones expected to bear the loss.

MakerDAO was founded by the Danish entrepreneur Rune Christensen and launched DAI on Ethereum in December 2017, backed at first only by ether; in November 2019 it began accepting several types of collateral. MKR was the governance token, with a supply of roughly one million, and it doubled as a backstop: when bad debt built up, as during the crash of March 2020, new MKR could be created and sold to cover it. In 2022 and 2023 the protocol began investing reserves in US Treasury bills and other real-world assets, which became a major source of income.

On 27 August 2024 MakerDAO announced its rebrand to Sky, and on 18 September 2024 it launched USDS and SKY, with DAI and MKR left in place and upgradable at fixed rates. A proposal in May 2025 moved voting power from MKR to SKY and introduced SKY staking with rewards paid in USDS. The protocol also created semi-independent units called "Stars"; the first, Spark, runs lending and savings products.

Holders convert MKR into SKY through an official converter. The conversion is one-way inside the protocol: SKY cannot be turned back into MKR except by trading on an exchange. To encourage stragglers, governance voted in September 2025 for a Delayed Upgrade Penalty, which from 22 September 2025 reduced the amount of SKY paid per MKR by 1 percent, rising by a further point every three months. By then about 81 percent of MKR had already been upgraded. The amount received is:

• $\text{MKR}$ is the number of MKR tokens being upgraded.
• $24{,}000$ is the fixed conversion rate.
• $p$ is the penalty in force at the time, written as a decimal.

For example, upgrading 2 MKR while the penalty is 1 percent gives $2 \times 24{,}000 \times 0.99 = 47{,}520$ SKY, instead of 48,000 before the penalty began.

• Governance. SKY holders vote on stablecoin rates, collateral types and the allocation of reserves, part of the protocol's governance.
• Staking. SKY can be staked to earn USDS from protocol income and to delegate votes, and stakers can borrow USDS against their staked tokens, a form of collateralized debt position.
• Rewards. At launch, users supplying USDS to the protocol could earn SKY rewards, set at 600 million SKY a year.
• Buybacks. A mechanism called the Smart Burn Engine uses part of the protocol's surplus to buy SKY on the open market, reducing the supply available to trade, similar in aim to token burning.

Because MKR's supply of about one million converts at 24,000 to one, SKY's supply is in the tens of billions, which gives each token a much lower unit price than MKR had.

The rebrand divided the community. Critics argued that it threw away one of the best-known names in crypto, and that large SKY rewards diluted holders. Like other governance tokens, SKY is exposed to poor decisions, concentrated voting power and smart-contract bugs. The protocol's growing reliance on Treasuries and other off-chain assets brings custodian and legal risks, and a failure of the over-collateralized loans that back its stablecoins would fall on SKY holders. Its stablecoins also compete with fiat-backed coins such as USDC, whose issuers hold cash and Treasuries directly rather than relying on crypto loans.

• Sky.money
• Upgrade MKR to SKY
• Sky developer documentation