Sky

What is Sky?

SKY is the governance token of the Sky Protocol, the system formerly called MakerDAO that issues the USDS and DAI stablecoins. It replaced MKR, which converts at 24,000 SKY per MKR. SKY holders vote on protocol rules and can stake to receive rewards funded by protocol surplus.

What it’s used for

Holders stake SKY to vote on proposals such as savings rates and collateral rules and to earn staking rewards. The protocol uses part of its surplus to buy SKY on the market, both to fund rewards and to burn tokens.

Role of the SKY token:

Evidence of real use

• Sky governance made SKY the sole governance token, with a Delayed Upgrade Penalty on MKR conversions starting at 1% in September 2025 and rising by one point every three months. Source
• From August 2026, each settlement cycle allocates 22.5% of surplus to SKY buybacks for staking rewards and 5% to SKY buy-and-burn. Source
• MKR holders could convert to SKY at 1:24,000 when MakerDAO rebranded in August 2024. Source

How Sky works

SKY gives holders a vote over the Sky Protocol. Proposals cover things like which collateral backs USDS and DAI, how much borrowers pay, the Sky Savings Rate, and how protocol surplus is used. Votes happen on-chain, and approved changes are bundled into executable 'spells' that update the smart contracts. Holders can stake SKY to take part in voting and to receive staking rewards, which are paid out over time.

SKY replaced MKR, the original MakerDAO governance token. In 2024 MKR became convertible at 24,000 SKY per MKR, and governance later made SKY the only governance token. Holders who convert late pay a Delayed Upgrade Penalty that began at 1% in September 2025 and rises by one percentage point every three months, which nudges remaining MKR holders to move. Staking rewards and voting are available only to SKY, not MKR.

The protocol earns income from borrowers and from assets it holds, such as tokenized Treasury and credit funds. After expenses and the savings rate, part of that net surplus funds SKY buybacks. Since August 2026, governance has set fixed shares of surplus for buybacks that pay staking rewards and for buying and burning SKY. Those amounts depend on protocol earnings and can change by vote.

Key moments

1. 2017MakerDAO launches DAI, governed by MKR holders.
2. 2024MakerDAO rebrands as Sky in August; MKR becomes convertible to SKY at 1:24,000.
3. 2025Governance makes SKY the sole governance token and introduces a Delayed Upgrade Penalty for MKR conversions starting in September.
4. 2026In August, staking rewards move to revenue-funded buybacks and a permanent buy-and-burn allocation begins.

Supply

SKY supply was set by converting MKR at a fixed 24,000-to-1 ratio. Governance controls any changes to issuance. Supply can shrink through the buy-and-burn allocation, while buybacks for staking rewards recycle tokens to stakers.

Risks to understand

• Protocol risk: SKY's value depends on the health of USDS and DAI, so collateral losses or a depeg would hurt holders.
• Governance concentration: large holders and founder-led initiatives can heavily influence outcomes.
• Smart-contract risk: bugs in the protocol or upgrades could cause losses.
• Regulatory risk: as of October 2026, how US stablecoin rules will treat protocol-issued stablecoins is unsettled, which could affect the system SKY governs.

Last reviewed October 4, 2026 by The Crypto Guide editorial team. Utility Lens ratings are editorial judgments, not investment advice. Market data from CoinGecko. Spot an error? Request a correction.