Summary
Llamarisk supports the migration proposal but recommends pausing the migration process until MakerDAO governance re-evaluates the proposed branding changes. This reassessment could lead to the reversion of the SKY token back to MKR. Currently, an active Governance Proposal is taking place, with a decision anticipated in early November.
Additionally, it has been noted that several functionalities associated with the SKY token have yet to be activated, creating uncertainty regarding the token’s full role within the Sky ecosystem due to the absence of comprehensive tokenomics documentation. Furthermore, geographical limitations affecting SKY token functionalities pose a drawback for certain users.
SKY Token Mechanisms
The SKY token can only be minted by upgrading MKR or by supplying USDS to the USDS-SKY Rewards. The SKY token rewards have a pre-determined amount of 600M tokens per year to be allocated, which counts towards the circulating supply of the token, and it becomes claimable in the UI as rewards accrue.
Users can upgrade their MKR to SKY at the rate of 1:24000. Nonetheless, the token’s use cases are still limited at the time of writing. At later stages of Sky Launch, SKY is previewed to gain additional features, including Sealed Activation and Regular Activation, which would give eligible users USDS and Token Rewards for committed participation in Sky Governance. SKY tokens can also be swapped back to MKR at the same 1:24000 ratio natively; therefore, the MKR debt can still be liquidated efficiently.
Sky Governance has yet to indicate that MKR will be completely discontinued. Accordingly, it is expected to remain unaltered for the foreseeable future unless Sky governance decides otherwise. In the meantime, users can continue to hold and use MKR tokens in the same ways as before the rebranding. Therefore, the decision to upgrade the tokens is currently optional.
However, due to the lack of tokenomics documentation, there are some parts of the SKY functioning that remain unknown, as outlined in the Sky Governance Forum post, in the original MakerDAO system, MKR tokens could be minted and sold to cover outstanding debt if the protocol’s surplus buffer was insufficient. This mechanism served as a last line of defense for the system’s solvency, but it is still being determined if SKY has retained this function.
Updated Legal Terms
Sky. money’s most recent Legal Terms, effective as of October 22, 2024, delineate geographical limitations on core platform functionalities, specifically the Sky Savings Rate mechanism, Sky Token Rewards program, and the Upgrade feature - the latter being exclusively applicable to MKR-to-SKY conversions. These restrictions are noteworthy as they affect all United States and Switzerland users.
Sky.money has implemented technical measures such as geoblocking protocols and VPN detection systems to enforce these jurisdictional constraints. The technological safeguards effectively create a barrier preventing users from restricted jurisdictions from participating in the one-directional token upgrade process from MKR to SKY.
Potential Rollback
In the face of the Maker → Sky rebranding, many users have expressed confusion over the overlapping roles of the Maker and Sky brands, especially as Sky also shares its name with the governance token. Some community members remain loyal to the Maker brand and its reputation, which requires addressing its identity and MKR tokenomics. To address these concerns, the proposal outlines options, including maintaining Sky as the core brand or re-establishing Maker as the central brand with possible updates to its identity.
Source: Sky Money Governance Forum, 25th October, 2024
Moving forward, community feedback will shape these decisions through a series of governance polls, emphasizing balancing progress with the Maker brand’s legacy. The outcome could lead to a re-establishment of MKR as the primary token or the potential coexistence of both SKY and MKR.
Disclaimer
This review was independently prepared by LlamaRisk, a community-led non-profit decentralized organization funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.