Prepared by Satoshi Protocol research team.
The pioneering DeFi protocol MakerDAO has taken a bold step forward in their business strategy and upgraded. Sky, as the protocol is now called, has undergone an overhaul which includes upgrading the stablecoin $DAI to $USDS and allowing their governance token, $MKR, to be exchanged for $SKY.
This shift, a central part of their "Endgame" plan, is aimed at enhancing the protocol’s image, increasing flexibility and user engagement.
In this article, we cover:
- What are MakerDAO and the $DAI token, and why the rebrand to Sky?
- What does the rebranding mean for Sky's products and mechanisms?
- The significance of Sky's collaboration with Aave
- How should $DAI holders, $MKR holders, and developers of integrated protocols adapt to these changes?
Why Rebranding?
MakerDAO was a known foundational over-collateralized stablecoin protocol on Ethereum, and a strong player in the DeFi ecosystem, allowing users to generate $DAI by collateralizing assets.
As the ecosystem matured and saw more adoption, and demand for DeFi services grew, so did the need for more efficiency and adaptability. In order to address this, in 2024, MakerDAO’s founder Rune Christensen introduced their bold "Endgame" plan.
The first phase of this plan involves a complete rebranding initiative, leading to the transformation of MakerDAO into Sky. More than a name change, this rebranding introduces a refreshed brand identity and marks the launch of several new mechanisms, set to go live on September 18, 2024.
These initiatives are designed to enhance the protocol’s efficiency and expand its use cases.
Changes Brought on by Sky
The rebranding of MakerDAO to Sky marks a new chapter in the MakerDAO Endgame plan. Below are the major changes that Sky introduces:
1. Protocol and Token Name Changes
MakerDAO’s two major tokens, $DAI and $MKR, will be upgraded to $USDS and $SKY. $DAI can be exchanged for $USDS at a 1:1 ratio, and users have the flexibility to choose whether to upgrade.
Similarly, $MKR holders can convert each $MKR into 24,000 $SKY, with the option to convert $SKY back to $MKR at any time. This provides more flexibility to existing token holders.
2. Enhanced Stablecoin Mechanism
$USDS will serve as the new stablecoin of the Sky ecosystem, inheriting all the functions of $DAI while introducing new incentive mechanisms.
$USDS holders will be able to participate in Sky's built-in token reward system, with 600 million $SKY tokens distributed annually to eligible $USDS holders. Users can also opt to benefit from the "Sky Saving Rate (SSR)" feature, offering stable and reliable yield growth.
3. Multichain Integration with Skylink
Skylink is Sky's multichain solution, having been launched on Ethereum mainnet and Layer 2. It enables 1:1 conversions of $USDS and $SKY across multiple chains and supports core Sky protocol features such as the Sky Saving Rate and token reward mechanisms. In the future, Skylink will expand to additional Layer 1 and Layer 2 blockchains.
4. Sealed Activation
Sky introduces Sealed Activation, which incentivizes long-term governance participation.
Users can seal their $SKY or $MKR tokens to receive 25% of the protocol’s surplus as rewards. After the launch of Spark Star, token holders can also choose to receive their rewards in $SPK tokens (15% of $SPK token rewards will be distributed proportionally to Sealed Activation users who choose to receive $SPK rewards.) Unsealing requires a 5% exit fee, which will increase by 1% every six months, capping at 15%.
Sky will also offer a simpler Regular Activation version, allowing users to earn $SPK rewards without sealing their tokens.
5. Sky Stars Ecosystem
Sky’s SubDAOs are now rebranded as Sky Stars—independent, specialized decentralized ecosystems that are part of the broader Sky protocol. These Stars will drive ongoing innovation and expansion within Sky.
The first Sky Star is the Spark protocol, which focuses on the efficient lending engine SparkLend, boasting a TVL of over $3 billion. Future Stars will launch, providing more innovative solutions to the DeFi market and further expanding the influence of the Sky ecosystem.
Partnership with Aave — Sky Aave Force
Following its rebranding into Sky, MakerDAO has teamed up with DeFi giant Aave to launch a collaborative initiative called Sky Aave Force. This partnership hopes to integrate Sky's new stablecoins, $USDS and $sUSDS, into Aave V3 markets, offering users more efficient capital utilization and enhanced earning opportunities.
Both protocols have synergy and this collaboration is set to drive wider DeFi adoption and strengthen both platforms' positions in the ecosystem.
Some of the most important elements of the collaboration include:
1. Integration of $USDS and $sUSDS into Aave V3
Sky's new stablecoins, $USDS and $sUSDS, will be introduced into Aave V3 markets. $sUSDS will serve as collateral in Aave V3’s Main Instance, while $USDS will be integrated into the Aave V3 Lido Instance.
2. Token Incentive Program
To accelerate the adoption of $USDS, Sky has introduced a generous token incentive plan, where users supplying $sUSDS to Aave V3’s main market will share in a pre-mined airdrop of 3.33 million SPK tokens monthly, which constitutes 50% of SparkLend’s total token emissions.
This incentive program is expected to attract more users to Aave’s lending platform, boosting the total value locked (TVL) and revenue growth for both protocols.
3. USDS D3M for Aave Lido Market
Sky plans to deploy a USDS D3M (Direct Deposit Module) with an initial debt ceiling of $100 million to Aave V3 Lido Instance.
This will help provide liquidity and lending opportunities for USDS, accelerating its market adoption. As demand grows, this debt ceiling may be increased.
4. Revenue Sharing
Aave and Sky have agreed on a revenue-sharing model, where both teams will split the income generated from $USDS and $sUSDS markets, in a mutually beneficial arrangement which ensures that both protocols grow and profit together.
What Is the "Endgame" Plan?
The "Endgame" Plan, introduced by MakerDAO co-founder Rune Christensen, is a full overhaul of governance and tokenomics with the goal of bringing the Sky ecosystem to a self-sustaining "Endgame State."
In this state, the MakerDAO protocol would become more resilient to external risks while avoiding increasing complexity, ensuring transparency, decentralization, and efficiency. The rebranding to Sky marks the first phase of this transformation, known as "Launch Season."
Following this, the plan will move into the "Scaling Up" phase, expanding the entire MakerDAO ecosystem. MakerDAO will also introduce a new Layer 1 blockchain, "NewChain," that is designed to support the protocol along with the economic and governance structures of its SubDAOs.
"NewChain" will serve as the main infrastructure for DeFi and cross-chain bridging, enabling the SubDAO ecosystem to scale without limits. The ultimate goal is to reach the final Endgame State, where all foundational governance mechanisms become immutable, establishing a more stable and enduring DeFi infrastructure.
Phase1: Rebranding and Token Renaming
As part of the Endgame Plan, MakerDAO’s stablecoin $DAI will be upgraded to $USDS, while governance token $MKR can be exchanged for $SKY at a rate of 24,000 $SKY for each $MKR.
Users can continue using $DAI and $MKR if they choose not to upgrade, but those who do will enjoy additional incentives and have the opportunity to access new features.
Phase2: SubDAOs Transforming into Sky Stars
The transformation of MakerDAO’s SubDAOs into independent entities known as Sky Stars is an important element of this transformation. These decentralized SubDAOs will operate with their own governance tokens, workflows, and business models while maintaining synergy with the core Maker protocol. This transition simplifies Maker’s governance, reduces its workload, and accelerates the growth of the entire ecosystem.
Phase3: Streamlined Governance and Aligned Voter Committees (AVCs)
Endgame introduces AVCs, which are groups of voters with shared values that focus on addressing high-level governance issues within MakerDAO. Each committee includes an “Alignment Conserver” to ensure decisions are aligned with the long-term goals of the protocol. This model simplifies voting processes, reduces governance overhead, and incentivizes more $MKR ($SKY) holders to actively participate.
Phase4: Tokenomics and Reward Mechanism Optimization
The Endgame Plan introduces significant changes to the tokenomics of $MKR. The protocol will use profits to buy back $SKY and liquidity pool tokens of SubDAOs, and at appropriate times, it will burn $MKR (or $SKY).
A new annual $SKY issuance mechanism will be implemented to support SubDAO incubation and workforce incentives. These changes aim to reduce the concentration of $SKY in the hands of a few large holders, ensuring a more balanced distribution across the ecosystem and promoting its fair growth.
How Should Users Respond?
If you are a MakerDAO user, holder of DAI or MKR tokens, or a protocol that has already integrated the DAI stablecoin, here’s what you can do when Sky goes live:
For DAI Holders
If you hold $DAI, you have the option to exchange it for $USDS at a 1:1 ratio.
$USDS will earn rewards in the form of 600 million $SKY tokens per year, built directly into the Sky Protocol—no need to engage with external protocols. You can also opt to use the Sky "SSR" feature, a proven savings option backed by billions of dollars, offering a stable way to earn additional returns.
For MKR Holders
If you hold $MKR, you can choose to upgrade it to $SKY at a rate of 1 MKR for 24,000 $SKY. While you may choose to keep your $MKR, upgrading will allow you to participate in Sky governance, share in protocol surplus, and gain access to additional incentives.
For Protocols That Have Integrated DAI
If you are a protocol that has integrated $DAI stablecoin, you need to assess the feasibility of supporting $USDS for your own protocol.
It is recommended to update the contract as soon as possible to support Sky's various new tokens, and at the same time to take into account the operation mechanism of the existing $MKR and $DAI within the agreement.
You must also take in consideration Skylink's multi-chain solution to keep up with the whole-chain story, and together comprehend the multi-chain integration of the agreement.
Conclusion
The launch of Sky is a strategic evolution in decentralized finance, with the introduction of $USDS and $SKY. The protocol is bringing forth new mechanisms aimed at enhancing efficiency, governance, and cross-chain integration within the DeFi ecosystem.
This shift presents opportunities for participants to engage with a more scalable and dynamic protocol. As Sky continues to unfold its broader vision, its impact on DeFi will be watched closely, shaping the next phase of DeFi with more refined infrastructure models.
