Author: shushu, BlockBeats
On August 27, the lending protocol MakerDAO announced its name change to Sky and launched its native governance token SKY, which will be used as an upgraded version of the Maker (MKR) token for the broader Sky ecosystem. It will also rename its decentralized stablecoin DAI to USDS on September 18.
Maker’s existing DAI stablecoin and MKR governance token will continue to exist, and users can voluntarily upgrade their tokens to USDS and SKY. Each MKR token can be upgraded to 24,000 SKY tokens, and DAI will be converted to USDS on a 1:1 basis.
Maker also plans to reshape its upcoming subDAO ecosystem "Sky Stars", which consists of independent decentralized projects with their own business models, tokens, governance, and vaults. Users will be able to use USDS to farm tokens issued by Stars. The first Sky Star to go online is the lending protocol Spark Protocol, which currently has a TVL of more than $3 billion.
Last night, after MakerDAO officially changed its name to Sky Protocol, the original official Twitter account @MakerDAO was immediately cancelled. At the same time, an employee of the Chinese media @Foresight_News registered the handle, which prevented the possibility of the well-known handle of MakerDAO being used by someone with ulterior motives to forge a fake project account. Currently, when searching for "makerdao" on Twitter, whether you follow it or not, the first project displayed is still Sky.
From MakerDAO to Sky, the rebranding of the first DeFi protocol in Ethereum’s history has not received unanimous support and understanding from the community, from damaging brand awareness to token value dilution, and even rising to the level that the Maker protocol is no longer decentralized. Since MakerDAO announced the "Endgame", every upgrade of the protocol has attracted market attention. After the expected split was officially implemented, community users questioned whether MakerDAO is still decentralized. How Maker's Endgame journey will affect the choices of its core users, the value proposition of the project itself, and future expectations are also issues that need to be continuously paid attention to.
Asset changes, are they diluting MKR?
This update involves multiple asset changes. The first is that each MKR token will be converted into 24,000 SKY tokens. This decision is seen as a MakerDAO equity split. Currently, the price of one MKR token is $1,923. After the split, one SKY is worth $0.08, which leaves room for imagination for the price performance of the new token.
As mentioned above, the new protocol Sky will also launch a subDAO ecosystem “Sky Stars”, which can independently issue governance tokens, manage its treasury and community, and independently implement DAO-specific decisions. However, this move has caused users to worry that the new tokens will dilute the value of the original protocol’s tokens.
Officials said that the role of Sky Stars is to innovate, experiment and take more risks, while Sky Protocol itself can continue to focus purely on maintaining the value and security of the USDS stablecoin. "Sky governance prevents tail risks, while Stars focuses on doing business in the trenches."
While the idea is to decentralize and distribute governance across the various SubDAOs, the sheer number of new governance tokens introduced could result in a significant dilution of the value of MKR. Each SubDAO would have its own token, which could dilute the value and attention of MKR. Not only would this dilution have the potential to harm the value of MKR, but it would also complicate the governance structure and make it less clear who has the real decision-making power.
At present, the first sub-ecosystem Spark protocol has been launched, and the Spark governance token SPK will be launched.
Is decentralization dead?
The most controversial issue regarding this rebranding is that MakerDAO's original decentralized stablecoin DAI will be converted 1:1 into USDS. The upgraded USDS may have a freezing function and will be restricted in certain countries and regions (including the United States and the United Kingdom) as well as VPN users.
The freezing function was not mentioned in Maker’s official announcement. According to blockchain media Wu Blockchain, Sam MacPherson, CEO of Phoenix Labs and Spark Protocol, confirmed that USDS will have a freezing function, but he later deleted the relevant tweet.
MakerDAO founder Rune responded that "this statement is somewhat misleading because DAI will continue to operate as before and can still be used. Upgrading USDS is optional, and only USDS will have the freeze function. DAI is an immutable smart contract and cannot be modified." Under another post asking what the freeze function is, Rune said that "it (freezing) is ultimately controlled through a decentralized governance mechanism."
Last Network CEO androolloyd.eth said, “Technically, it does have an authorization mechanism, but currently it only checks the authority to mint DAI. The transfer function has not yet been enabled, but it is upgradeable, so it can be reviewed in essence according to the will of governance.”
Centralized stablecoins such as USDC and USDT have censorship and freezing functions on some chains. USDS may do this to comply with compliance requirements and has the ability to blacklist holders, but this decision has damaged the confidence of many community users.
Crypto KOLlaurence said bluntly that "Olympus has fallen", meaning that something that was once powerful or unshakable has been defeated or lost control. Community users commented that "a stablecoin with a freeze function is like a drug-addicted squirrel teetering on a tightrope, and it is not stable at all. All those who hold DAI have unknowingly become CBDC testers. I hope you like this digital prison built by those guys who have been screwing up traditional finance."
MilliΞ, a member of Synthetix, commented: “I think Maker will gradually become irrelevant from here. As a DeFi native, I can’t describe how pessimistic and ill-thought-out this roadmap is. By the time these plans are actually implemented, DAI will have lost all of its moats and will be completely replaced by more reliable alternatives (in this case, even something like USDC is better).”
Curve Finance commented that (Maker's move) may just be an attempt to compete with USDC and USDT.
Will DAI lose its moat as a result?
In MilliΞ's view, "DAI has been able to prosper until now entirely because Curve holders have provided a lot of subsidies to 3pool, giving it a strong liquidity moat. Without 3pool, the supply of DAI would never have exceeded $1 billion."
As Yearn and Curve provide subsidies to holders, the price of DAI was once higher than the anchor value, which prompted Maker to introduce the Peg Stability Module (PSM), which provides a way to meet DAI supply needs without requiring users to over-collateralize their loans. Currently, USDC is the largest PSM Maker vault, and others include USDP and GUSD. Maker's PSM once endorsed more than 50% of the DAI supply. As DAI became more and more dependent on PSM, the community criticized it, believing that over-reliance on PSM would make DAI a proxy for centralized stablecoins.
However, as subsidies for DeFi projects decreased, and even Curve launched its own stablecoin crvUSD to join the competition, Maker had to seek new sources of income. Maker began to turn to RWA, and when the Fed began to raise interest rates, MakerDAO transferred PSM funds off-chain to obtain returns. This strategy has greatly increased Maker's income, but with the growing expectation of a rate cut by the Fed, this situation may no longer continue.
Currently, most of MakerDAO's revenue comes from RWA. The sub-DAO mentioned above is responsible for innovation, experimentation and taking more risks, while Sky itself focuses on maintaining the value and security of the USDS stablecoin. It is more like Maker separating its on-chain and off-chain businesses.
DAI's dominance relies heavily on its dominance in the liquidity pool and its decentralized competitive advantage over other stablecoins, but as DeFi project subsidies disappear and competitors catch up, DAI's market share in decentralized stablecoins may be eroded. The competitiveness of centralized stablecoins is also increasing. Maker's upgrade of DAI to USDS and its freezing function means that DAI as a decentralized stablecoin will be less attractive, and its main business will shift more thoroughly to RWA.
Turning to RWA and adding a freeze function is an inevitable business decision. Adam Cochran, a well-known KOL and partner of CEHV, analyzed that if Maker wants to be supported by treasury bond income, even through secondary treasury bond transactions, it must have a freeze function and a VPN region blocking function. This is a trade-off that the industry needs to make, because you can't enjoy the benefits of the traditional U.S. financial system without complying with its rules. "Either choose to decentralize and operate independently; or accept the constraints of the Treasury Department to get their "carrot."
Crypto investor Ericuuuh believes that "Introducing an independent function at the stablecoin level to isolate potential problem funds is much better than having some of your supporting assets frozen by the Ministry of Justice, which makes it technically unsupportable." This is also the significance of Rune's statement that the freezing function is controlled through a decentralized governance mechanism.
MakerDAO's "Endgame" plan was originally intended to respond to key opportunities and challenges facing the blockchain industry, making Maker governance more efficient, transparent, and inclusive by establishing a resilient and reliable governance balance. But now the situation seems to have turned into a collective complaint from community users, who believe that Maker is becoming more and more centralized and opaque.
But we need to realize that after the RWA business becomes the core source of Maker’s income, it needs to make more adjustments to its mechanisms to ensure that high returns can continue. This also reminds us that any growth in the adoption of RWA assets may weaken the decentralization and censorship resistance of the underlying protocol.
