- Sky is urging MKR holders to convert it to SKY.
- Failing to convert the tokens will yield fines.
Investors in DeFi stalwart Sky are rushing to convert legacy governance tokens before a financial penalty kicks in on Monday.
Sky, formerly known as Maker, rebranded last year as part of an overhaul meant to boost the brand’s appeal among people outside its base of decentralised finance die-hards.
Sky issues the DAI and USDS stablecoins. It is the 11th-largest protocol in DeFi, with more than $6 billion in user deposits.
The ostensibly leaderless cooperative is run by investors who hold its governance token, which grants membership and voting rights.
Among the many changes in last year’s rebrand was the creation of a new governance token, SKY, which would replace the legacy governance token, MKR.
Part of the idea was brand alignment: Using MKR to cast votes for the Sky protocol would likely confuse would-be investors.
Unit bias was another motivation, however. Users would be able to upgrade MKR to SKY at a conversion rate of 1 to 24,000.
Sky founder Rune Christensen previously told DL News that retail investors were more likely to spend $1,853 — the value of a single MKR token as of Thursday evening — on 24,000 SKY tokens than on one MKR.
The problem? Nobody wanted SKY.
Conversion penalties
Only 11% of MKR tokens had been converted to SKY as of May, according to one estimate.
At the time, approximately 101,000 crypto wallets held MKR, while only 2,000 held SKY. Christensen called it “a key limiting factor preventing exchanges from adopting SKY.”
That month, members of the cooperative voted to formally transfer control from MKR holders to SKY holders, disable “downgrades” in which people convert their SKY to MKR, and introduce a 1% penalty on those who upgrade after September 18.
The penalty was eventually delayed — but just by four days.
On Thursday, SKY holders began voting to approve September 22 as the beginning of the penalty period.
Should the proposal pass, any conversions after that date would be subject to a 1% penalty. The penalty would increase by 1% every three months thereafter.
But the vote appears to be a foregone conclusion, with Sky and partner protocols warning MKR holders they will lose money if they wait too long to convert their tokens.
The largest MKR holders appear to have received the message: as of Thursday evening, almost 82% of all MKR tokens had been converted to SKY tokens.
Conversions jumped after the May vote, with almost 40% of MKR having been converted by June 1. And they’ve jumped again this month: less than 60% of tokens had been converted on September 1.
There are still some 174,000 MKR tokens worth about $323 million that have yet to be converted, according to Sky’s data.
While some users rush to avoid the conversion penalty, it appears there is an enormous number of smaller holders who have yet to make the jump: According to Sky’s own figures, some 81,000 people hold the MKR token, while just 8,000 hold SKY tokens.
Crypto market movers
- Bitcoin is down 0.2% over the past 24 hours to trade at $116,973.
- Ethereum is down 0.% over the past 24 hours trading at $4,541.
What we’re reading
- Stablecoin startups raise record amounts as total supply seen to hit $1tn — DL News
- Eric Trump says crypto can ‘save the US dollar’ — Financial Times
- The Onchain5 Part 2: Robinhood and Stripe Upgrade Finance’s Back End — Unchained
- 5 sectors crushing it this month — Milk Road
- Dogecoin and XRP spot ETFs debut with ‘shockingly solid’ $30m volume out the gate — DL News
Aleks Gilbert is DL News’ New York-based DeFi correspondent. Got a tip? Email at aleks@dlnews.com.
