What Are the New Opportunities for MakerDAO to Upgrade to Sky?

2024-08-30, 04:51

[//]:content-type-MARKDOWN-DONOT-DELETE
 ![](https://gimg2.gateimg.com/image/article/17249932461692587449analysis.jpeg)
##  [TL；DR]: 
MakerDAO recently changed its name to Sky Protocol and launched a new stablecoin, USDS, and governance token, SKY. This upgrade aims to seek growth and breakthroughs in the DeFi field.

The launch of Sky Protocol has sparked widespread discussions about decentralization, compliance, and brand renaming, especially the potential freezing feature that the new stablecoin USDS may introduce, which has generally raised concerns and criticism in the community.

In the future, Sky Protocol's ability to inherit and strengthen its original competitive advantages in the DeFi ecosystem will depend on its ability to respond to regulatory requirements, meet community needs, and promote technological innovation.

## Introduction
After two years of careful preparation, MakerDAO finally announced this week that it has entered a new stage according to the Endgame plan, officially renamed Sky Protocol, and launched the USDS stablecoin and governance token SKY.

Although this transformation has attracted attention, it has also sparked diverse discussions on decentralization, compliance, and brand transformation. This article will analyze the new opportunities and challenges presented by this upgrade for readers.
 
## MakerDAO Upgrades to SKY and Will Launch New Stablecoins and Governance Tokens
This week, MakerDAO, a well-established DeFi Lending protocol brewing for two years, announced its official renaming to Sky Protocol, aiming to promote the popularization of DeFi (decentralized finance) and simplify the user experience.

The most prominent feature of this brand upgrade is the launch of the new stablecoin USDS and governance token SKY. According to the rules, USDS and DAI are exchanged in a 1:1 ratio, while MKR and SKY are exchanged in a 1:24000 ratio. The existing DAI stablecoin and MKR governance token will continue to circulate, and users can voluntarily choose to upgrade.
 ![](https://gimg2.gateimg.com/image/article/17249933221.jpg)
Source: sky.money
 
Meanwhile, MakerDAO's SubDAO will be renamed Sky Stars, and each Sky Star sub-DAO will be able to independently issue governance tokens, and manage its finances, and community. The first project, subDAO Spark, is a DeFi Lending platform based on Sky. Its TVL has reached $2.42B, ranking third among DeFi lending protocols.
 ![](https://gimg2.gateimg.com/image/article/17249933412.jpg)
Source: DefiLlama

In addition, the project team will launch a new product Sky.money and a new DeFi application on September 18th to undertake the key functions of Sky Protocol, and launch a multi-chain solution Skylink to support the migration of new tokens such as USDS and SKY to major L2 networks.

The project team also carried out relevant reward activities to cooperate with this upgrade. Users participating in USDS holdings will receive SKY token rewards, with an annual distribution of 600 million tokens. Sky has also launched a double "early bird" reward campaign, and until September 18th, users can receive double rewards by providing USDS to the Sky Token reward module on Sky.money.

In addition to the above measures, MakerDAO will optimize smart contracts, improve governance mechanisms, and enhance system scalability, which will not be further elaborated here.

## The Community has Mixed Reviews, and the Coin Price Performance is Average
Although the brand upgrade has attracted market attention, the price of the MKR token did not receive buying hype before the upgrade, but instead followed the overall downward trend of the market after the upgrade, and the price-performance was not satisfactory.
 ![](https://gimg2.gateimg.com/image/article/17249933793.jpg)
Source: Gate.io
 
 This is completely opposite to last year, when MakerdaoDAO was sought after when it entered the RWA track, indicating that the market did not buy into this upgrade.
 
The main criticism in the community at present is that the new stablecoin USDS will introduce a freezing function. In the eyes of most users, this move will bring USDS closer to centralized stablecoins such as USDT and USDC, thereby weakening its censorship resistance and license-free features and directly touching DeFi's core principle of decentralization.

MakerDAO co-founder Rune clarified this. He pointed out that USDS does not have a freezing function in the early stages of its launch and emphasized that the implementation of this function will be based on future governance decisions aimed at preventing risks and complying with legal requirements of jurisdictions. At the same time, he reiterated the stability and invariance of DAI and the existence of USDS as an optional upgrade.
 ![](https://gimg2.gateimg.com/image/article/17249934014.jpg)
Source: @RuneKek
 
In addition, Sky's official website imposes access restrictions and VPN usage bans on some regions, and USDS recognition is far inferior to DAI. Issues such as improper handling of the original official Twitter account have further exacerbated community concerns, resulting in low user enthusiasm for the new coin migration.

In short, the community's negative evaluation of this upgrade is more positive than its positive recognition, and whether MKR will boost performance may need to be further observed after Sky.money is launched in mid-September.
 
## Can Sky Break through the Weak Growth of MakerDAO?
In my opinion, this upgrade is more due to MakerDAO's attempt to break through the bottleneck in the decentralized stablecoin field. Its exploration of catering to regulatory requirements also touches upon the concept of community decentralization, leading to more criticism than praise for this upgrade.

In fact, although DAI occupies an important position in the DeFi field, its application scenarios are not widespread, and it has long been squeezed by the share of centralized stablecoins such as USDT.

According to DefiLlama's data, as of the writing date, DAI ranks third in the stablecoin market value, but the market shares of USDT and USDC reach 69.5% and 20.24% respectively, while DAI's market share is only 3.1%.
 ![](https://gimg2.gateimg.com/image/article/17249934335.jpg)
Source: DefiLlama
 
The decline in the proportion of DAI is mainly due to the continuous issuance of USDT, which has led to fluctuations, but the stagnant market value of DAI in the past year is also an important reason. Since reaching its highest market value of $7.1B in August 2022, DAI has continued to decline to its lowest point of $3.9B, which has remained around $5.3B for a year. This undoubtedly highlights the dilemma of MakerDAO's inability to expand DAI adoption against the backdrop of declining returns caused by institutional funds entering ETFs and interest rate cuts.
![](https://gimg2.gateimg.com/image/article/17249934496.jpg)
Source: THEBLOCK

It is not difficult to see that MakerDAO's upgrade aims to use USDS to support RWA usage, opening up competition with <a href="/ja/price/tether-usdt" target="_blank" class="blog_inner_link">Tether</a> and Circle. It retains DAI to not weaken its advantage in the DeFi decentralized stablecoin track, thus achieving both offense and defense.

Overall, MakerDAO's transition to Sky is a comprehensive brand and product upgrade, but its designed USDS freeze function, blocking access to certain regions, and other actions that cater too much to regulatory requirements have exposed its problems in communication with the community and incomplete upgrade planning. Whether SKY can strengthen its existing market advantages and promote more growth, innovation, and participation in the entire DeFi ecosystem will depend on its ability to gradually respond to regulatory requirements, meet community needs, and drive technological innovation.

<div class="blog-details-info">
<div>Author:**Carl Y.**, Gate.io Researcher
<div>Translator:Joy Z.
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>