Sky Proposes 1% Penalty on Delayed MKR-to-SKY Conversions to Consolidate Governance
## Executive Summary
Sky, formerly **MakerDAO**, has initiated a governance vote for a 1% "Delayed Upgrade Penalty" on **MKR-to-SKY** token conversions. This penalty, if approved, will commence on September 22, 2025, and is designed to escalate quarterly. The initiative is a core component of Sky's "Endgame" overhaul, aiming to consolidate governance under the **SKY** token and ultimately retire **MKR**. Current data indicates approximately 81% of **MKR** has already been converted, leaving 176,070 **MKR**, valued at over $316 million, yet to be swapped.
## The Event in Detail
The **Sky** protocol, which rebranded from **MakerDAO**, has opened a governance vote to introduce a "Delayed Upgrade Penalty" on its legacy **MKR** tokens. This strategic measure is intended to accelerate the migration of **MKR** holders to the new **SKY** governance token, thereby standardizing ecosystem operations following last August's rebrand. The proposed fee structure is a critical step in Sky's multi-phase "Endgame" overhaul, which aims to sunset **MKR** in favor of **SKY** and complete the transition to **SKY** as the protocol's sole governance token. The move is designed to simplify governance processes for new users and improve clarity for exchanges, consolidating the brand identity with its primary digital asset.
## Financial Mechanics
The proposed "Delayed Upgrade Penalty" stipulates a 1% fee, or deduction, on the **SKY** tokens received during **MKR-to-SKY** conversions, which is set to begin on September 22, 2025. If approved, this penalty will increase by one percentage point every three months thereafter. Conversions completed prior to this specified deadline will not incur any fees. The established conversion rate remains fixed at 1 **MKR** for 24,000 **SKY**. For instance, if converted post-deadline, a 1% penalty would mean 23,760 **SKY** would be received instead of 24,000 **SKY**. This financial disincentive is a direct mechanism to motivate timely participation in the token migration.
## Business Strategy & Market Positioning
**Sky**'s implementation of a "Delayed Upgrade Penalty" aligns with its broader "Endgame" strategy to forge a more efficient and unified governance framework. By compelling the migration to a single **SKY** token, the protocol aims to enhance clarity for both exchanges and new participants, solidifying the brand's association with its primary governance asset. This strategy mirrors approaches seen in other token migrations within the decentralized finance (**DeFi**) sector, where protocols seek to streamline control and phase out older assets. The penalty mechanism is a direct accelerant for the final stage of the token transition, designed to mitigate the complexities of operating with parallel governance tokens.
## Broader Market Implications
The introduction of a "Delayed Upgrade Penalty" by a prominent **DeFi** protocol such as **Sky** could establish a significant precedent for token migration strategies across the wider **Web3** ecosystem. In the immediate term, this impending penalty is projected to stimulate a rapid conversion of the remaining **MKR** tokens into **SKY**, potentially leading to increased price volatility for the **MKR/SKY** trading pair as the September 22, 2025, deadline approaches. Over the long term, the successful consolidation of governance under **SKY** is expected to bolster the protocol's stability and operational efficiency, thereby enhancing the intrinsic value proposition of **SKY** as the exclusive governance asset. This development highlights a growing trend among decentralized autonomous organizations (**DAOs**) to optimize their governance structures and simplify user engagement.
