The Sky Protocol is a decentralised financial ecosystem that emerged from the rebranding of MakerDAO in 2024. It was designed to improve governance efficiency, enhance system resilience, and provide a more scalable structure for decentralised finance (DeFi). The protocol builds on the Maker framework, maintaining decentralised governance while introducing upgraded financial instruments, including the Sky Dollar (USDS) stablecoin and the SKY governance token.

The Sky ecosystem offers multiple functionalities, such as the Sky Savings Rate (SSR), Sky Token Rewards (STRs), Seal Rewards, and the upcoming Activation Rewards. Additionally, SkyLink provides a bridge between Ethereum Layer 1 and Layer 2 networks, enabling lower-cost transactions. The Sky Protocol also features Peg Stability Modules (PSMs) to stabilise USDS and governance mechanisms that enable community-driven decision-making.

The ecosystem includes independent decentralised projects called Sky Stars, such as Spark, which focuses on DeFi lending and borrowing solutions. The Sky Atlas serves as a foundational governance framework, documenting rules and processes for the ecosystem’s evolution.

The migration from MakerDAO to the Sky ecosystem included the introduction of SKY as the governance token, replacing MKR. Holders of MKR were given the option to upgrade to SKY at a fixed rate of 1:24,000. This change was implemented to address governance scalability challenges and ensure broader participation in decision-making processes within the Sky Protocol.

The Sky ecosystem continues to support MakerDAO’s legacy assets, including DAI and MKR, while offering upgraded versions in the form of USDS and SKY. Governance decisions regarding the long-term role of legacy tokens remain in the hands of the community through onchain voting.

Sky (SKY) is the native governance token of the Sky Protocol, introduced as an upgraded version of Maker’s MKR token. It enables decentralised decision-making within the ecosystem, allowing holders to vote on protocol changes, governance proposals, and economic policies.

SKY was created to improve governance participation by increasing token accessibility. The supply of SKY is significantly larger than MKR, with an upgrade rate of 1 MKR to 24,000 SKY, making governance more inclusive and scalable. The token plays a crucial role in securing the ecosystem and ensuring decentralised control over protocol decisions.

SKY plays a fundamental role in the governance and incentive mechanisms of the Sky Protocol. Its primary use cases include:

• Governance: SKY holders participate in decentralised onchain voting, influencing protocol parameters such as stability fees, collateral onboarding, ecosystem incentives, and governance structures.
• Activation Token Rewards: Users will soon be able to supply SKY to the Activation module to earn USDS or other Sky ecosystem tokens as rewards.
• Seal Rewards: Users can supply SKY to the Seal Engine, generating additional USDS rewards while also enabling voting power delegation. Sealing SKY also supports decentralisation and security within the protocol.
• Borrowing and Lending: SKY can be used as collateral within the ecosystem to generate and borrow USDS, leveraging decentralised lending markets powered by Spark.
• Trading and Conversion: SKY can be traded for USDS and other assets via decentralised liquidity pools, supporting ecosystem liquidity and user participation.
• Security and Decentralisation: By staking or locking SKY in governance contracts, users contribute to the resilience and long-term stability of the protocol.

SKY was developed by the team behind MakerDAO as part of the transition to the Sky Protocol in 2024. Led by Rune Christensen and the MakerDAO community, the upgrade aimed to improve governance efficiency and decentralisation by expanding the token supply and enhancing participation.

The development of SKY was part of a broader effort to restructure governance, making it more resilient and adaptable to changes in the DeFi landscape. The introduction of SKY aligns with the Sky Protocol’s objective of fostering innovation, community-driven governance, and increased accessibility to DeFi.