Investors in the decentralized finance protocol Sky are facing an impending deadline to convert their legacy MKR tokens into the newly launched SKY tokens. Failure to make the conversion by Monday will result in financial penalties for late converters. Sky, which rebranded from Maker last year, aims to enhance its appeal to a broader audience beyond traditional DeFi enthusiasts. The protocol is responsible for issuing DAI and USDS stablecoins and remains a major player in the DeFi landscape, ranking as the 11th-largest protocol with over $6 billion in user deposits. However, the total value locked (TVL) in Sky has seen a decline since reaching highs in 2022.
The governance of the protocol is managed by token holders, who utilize their governance tokens for participation in decision-making processes. The rebranding process last year saw the introduction of the new SKY governance token, designed to replace the MKR token. The motivation behind this shift was partly aimed at brand alignment, as using MKR for governance decisions within the Sky protocol posed a risk of confusion for potential investors. Additionally, the conversion plan allows users to convert MKR to SKY at a ratio of 1 MKR for 24,000 SKY tokens. Sky’s founder, Rune Christensen, highlighted that retail investors might find it more attractive to purchase 24,000 SKY tokens for the price of one MKR, which was valued at $1,853.
Despite these intentions, early conversion rates have been sluggish. By May, only an estimated 11% of MKR tokens had been converted, with about 101,000 wallets holding MKR, compared to merely 2,000 wallets with SKY. The lack of a significant number of SKY holders was cited as a challenge for exchanges considering the adoption of the new token. In a recent cooperative vote, members agreed to transfer control from MKR holders to those holding SKY tokens and introduced a 1% penalty for upgrades occurring after September 18. Although the implementation of the penalty was temporarily delayed, it appears set to take effect on September 22, with conversions after this date incurring a 1% fee that will escalate every three months.
As the deadline approaches, the conversion rate has seen a marked increase, with nearly 82% of all MKR tokens converted to SKY by Thursday evening. This represents a significant jump from the conversion rate a few months prior, where approximately 40% of MKR had been converted by June 1. Nevertheless, an estimated 174,000 MKR tokens, worth around $323 million, remain unconverted, indicating a substantial portion of smaller investors have not yet made the transition; currently, around 81,000 holders own MKR versus 8,000 who own SKY.
In broader market trends, Bitcoin has dipped 0.2% in the last 24 hours, trading at $116,973, while Ethereum has experienced a negligible decrease, currently priced at $4,541.
