The evolution of MakerDAO into Sky Protocol marks a pivotal moment in decentralized finance (DeFi) history. As the first DeFi protocol built on Ethereum, MakerDAO has long been a symbol of innovation, decentralization, and financial sovereignty. But its recent rebranding to Sky, the introduction of the SKY governance token, and the renaming of DAI to USDS have ignited fierce debate across the crypto community.
This transformation—part of Maker’s "Endgame" plan—is more than just a name change. It represents a fundamental shift in governance, tokenomics, and philosophy. While some see it as a necessary evolution for scalability and sustainability, others fear it signals the erosion of core DeFi principles: decentralization, censorship resistance, and user autonomy.
Let’s explore what’s really changing, why it matters, and how this impacts the future of one of crypto’s most influential protocols.
The Sky Rebrand: What Changed?
On September 18, MakerDAO officially transitioned into Sky Protocol, launching a new native governance token called SKY—an upgraded version of the existing MKR token. Holders can voluntarily upgrade their tokens:
- 1 MKR = 24,000 SKY
- 1 DAI = 1 USDS (new stablecoin name)
👉 Discover how token upgrades are reshaping DeFi governance models.
The existing DAI and MKR tokens will continue to function, but the vision is clear: Sky aims to expand beyond a single protocol into a broader ecosystem known as Sky Stars.
Introducing Sky Stars: A SubDAO Revolution
Sky Stars are independent decentralized projects (subDAOs) under the Sky umbrella. Each Star operates with its own:
- Business model
- Governance structure
- Treasury management
- Native token
The first live Star is Spark Protocol, a lending platform with over $3 billion in total value locked (TVL). Spark will soon launch its governance token, SPK.
This modular approach allows Sky Protocol to focus solely on maintaining the stability and security of USDS, while Stars handle innovation and risk-taking. As Maker’s team puts it:
"Sky governs tail risk; Stars fight in the trenches."
But this structural shift raises critical questions about value dilution, governance fragmentation, and the true cost of scalability.
Is MKR Being Diluted?
The 1:24,000 token split has drawn comparisons to stock splits in traditional finance. With MKR trading around $1,923 at the time of writing, each SKY token would be worth roughly $0.08 post-conversion—a psychological move that could attract retail participation.
However, concerns remain about long-term value dilution. As each Sky Star launches its own governance token, the overall attention and economic weight may shift away from MKR (and now SKY). If dozens of Stars emerge, will SKY still hold meaningful influence?
Moreover, distributing governance across multiple tokens complicates decision-making. Who ultimately controls protocol upgrades? Can conflicting incentives between Stars destabilize the ecosystem?
While decentralizing innovation is smart, there's a fine line between modular resilience and fragmented authority.
Has Decentralization Been Compromised?
Perhaps the most controversial aspect of the upgrade is the potential for USDS to include freeze functions—a feature previously unthinkable for a so-called “decentralized” stablecoin.
Although Maker’s official announcement did not mention freezing capabilities, Sam MacPherson, CEO of Phoenix Labs and Spark Protocol, confirmed in a now-deleted tweet that USDS would support such functionality. This means certain users—especially those accessing services via VPNs or residing in restricted jurisdictions like the U.S. or U.K.—could face transaction blocks.
Rune Christensen, founder of MakerDAO, clarified that DAI will continue operating as before:
"DAI remains unchanged and fully functional. Upgrading to USDS is optional—and only USDS will have potential freeze mechanisms controlled by governance."
Technically speaking, as noted by Last Network CEO androolloyd.eth, the system already has an authorization layer used during DAI minting. While transfer-level censorship isn’t active today, the code is upgradeable—meaning future governance decisions could enable it.
This mirrors centralized stablecoins like USDC and USDT, which routinely comply with regulatory demands. But for many in the DeFi community, this blurs the line between decentralization and compliance—and erodes trust.
As crypto influencer MilliΞ put it:
"I think Maker is slowly becoming irrelevant. As a DeFi native, I can’t express how bleak and poorly thought out this roadmap feels."
Another commentator lamented:
"A stablecoin with freeze capabilities is like a drug-addicted squirrel balancing on a tightrope—anything but stable."
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Will DAI Lose Its Competitive Edge?
For years, DAI’s dominance stemmed from two key advantages:
- True decentralization – Unlike USDC or USDT, DAI wasn’t issued by a corporation subject to government pressure.
- Strong liquidity moats – Thanks to Curve Finance’s 3pool subsidies, DAI enjoyed deep liquidity and premium pricing above its $1 peg.
But those dynamics are shifting.
As Curve reduced incentives and launched its own stablecoin (crvUSD), Maker had to adapt. Its response? Pivot toward real-world assets (RWA).
By investing PSM (Peg Stability Module) funds into off-chain instruments like U.S. Treasuries, Maker significantly boosted revenue. Today, RWA constitutes the majority of its yield-generating activities.
Yet this success comes at a cost: increased regulatory exposure. As Adam Cochran, partner at CEHV, observes:
"If you want Treasury yields, even through secondary markets, you must accept freeze functions and geo-blocking. You can’t enjoy the benefits of traditional finance without complying with its rules."
In other words:
Either stay fully decentralized—or accept oversight for higher yields.
Ericuuuh, a crypto investor, offers a pragmatic view:
"It’s better to isolate risky funds via opt-in features than risk having your entire collateral seized by the Department of Justice."
Still, this trade-off risks alienating core users who chose DAI precisely because it stood apart from centralized alternatives.
FAQ: Your Questions Answered
Q: Does DAI still exist after the Sky rebrand?
A: Yes. DAI continues to operate unchanged. Users can choose whether to upgrade to USDS.
Q: Can USDS be frozen?
A: Officially unconfirmed—but technically possible. Governance could enable freeze functions in the future. DAI itself remains censorship-resistant.
Q: Why rename MKR to SKY?
A: To reflect a broader ecosystem vision beyond just one protocol. SKY serves as the foundational governance layer for all Sky Stars.
Q: Is Maker still decentralized?
A: Structurally yes—but increasingly complex. With subDAOs launching their own tokens and potential compliance mechanisms, centralization risks are growing.
Q: Should I upgrade my MKR to SKY?
A: It’s optional. Consider your stance on governance participation, ecosystem involvement, and risk tolerance before deciding.
Q: What happens to Spark Protocol?
A: Spark is the first Sky Star. It uses USDS and will issue its own token (SPK), focusing on lending innovation within the Sky framework.
Final Thoughts: The Endgame Dilemma
Maker’s Endgame plan was designed to future-proof DeFi amid increasing regulatory scrutiny and competition. By separating high-risk innovation (Stars) from core stability (Sky), it aims to build a resilient, scalable ecosystem.
But at what cost?
Core keywords like MakerDAO, Sky Protocol, DAI, USDS, MKR, SKY, DeFi, and RWA aren't just technical terms—they represent ideological battlegrounds. Every step toward institutional adoption chips away at the radical promise of permissionless finance.
Whether this evolution strengthens or weakens Maker’s position depends on who you ask:
- To institutions? More compliance = more trust.
- To DeFi purists? Any censorship = betrayal.
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One thing is certain: as real-world assets reshape crypto economics, protocols must navigate an increasingly narrow path between innovation and integrity.
And for Ethereum’s original DeFi pioneer, that balance has never been more delicate.