Introduction

On September 18, MakerDAO officially upgraded to Sky, with its original stablecoin DAI rebranded as USDS, and its governance token MKR upgraded to SKY. These changes form the Endgame plan by Rune Christensen, the founder of MakerDAO. Proposed years ago, it aims to improve the governance efficiency and scalability of the protocol.

Since its inception, the Endgame plan is a pivotal move to address the challenges MakerDAO has faced for long periods. As the DeFi ecosystem rapidly expands, MakerDAO must balance decentralization and scalability while addressing market demands and maintaining its decentralized nature. The Endgame plan arose under these circumstances, introducing a dual stablecoin strategy (USDS and PureDai) and a new governance mechanism (SKY token) to open new avenues for MakerDAO’s development.

This article delves into the background, content, and impact of this rebranding, exploring the strategic perspective of the Endgame plan and examining the changes brought about by MakerDAO’s upgrade to Sky and its significance for the future of decentralized finance (DeFi).

I. Background and Motivation Behind MakerDAO's Upgrade to Sky

1.1 The History of MakerDAO

Since its establishment in 2014, MakerDAO has been a pioneer in the decentralized finance (DeFi) ecosystem. As one of the earliest decentralized autonomous organizations (DAOs), MakerDAO led the launch of the decentralized stablecoin DAI. DAI’s core design philosophy is to maintain a 1:1 peg to the U.S. dollar through over-collateralization. By using Ethereum (ETH), Bitcoin (BTC), and other crypto assets as collateral, users can borrow DAI, giving DAI its decentralized nature.

However, as market demands expanded, DAI began facing multiple challenges. DAI's market share has gradually declined in competition with centralized stablecoins (like USDT, USDC, FDUSD) and emerging decentralized stablecoins (FRAX, USDD, USDe). While DAI ranks third in market capitalization, its market share is relatively small compared to USDT and USDC.

This bottleneck in market share led MakerDAO to rethink its strategy, particularly regarding how to scale while retaining its decentralized core value. Rune Christensen realized that the current governance structure and single DAI stablecoin could not simultaneously meet the needs of decentralization and scalability, making strategic adjustments necessary for MakerDAO to address these new challenges.

1.2 The Introduction of the Endgame Plan

Rune Christensen proposed the Endgame plan in 2022, aimed at solving the structural problems facing MakerDAO through a series of reforms. The core goals of the Endgame plan are to improve governance efficiency, enhance protocol resilience, and further expand the protocol’s application scope. Specific measures include the introduction of multiple SubDAOs to decentralize governance and operations, optimizing the decentralized governance model, and implementing a dual stablecoin strategy to cater to different market needs.

The key idea of the Endgame plan is to strike a balance between decentralization and scalability, driving MakerDAO’s long-term sustainable development. Rune emphasized that as DeFi matures, MakerDAO’s single governance and product structure can no longer meet the complex demands of the future. Thus, the Endgame plan is not only a technical reform, but a systemic strategy designed to enhance MakerDAO’s market competitiveness and decentralized nature by decentralizing governance and diversifying products.

1.3 The Necessity for Rebranding

The Endgame plan identified three core issues that MakerDAO needs to address: maintaining decentralization, enhancing compliance, and improving scalability. MakerDAO’s rebranding to Sky is a critical step in the Endgame plan, aiming to enter the DeFi market with a fresh image, reshaping its market identity and product strategy.

• Maintaining Decentralization: MakerDAO, as a pioneer in decentralized finance, is built on the principle of avoiding central management and control. However, as the market evolves, a fully decentralized model faces challenges in scaling. The rebranded Sky introduces a dual stablecoin strategy, separating decentralization from compliance, allowing users to choose between stablecoins (USDS or PureDai) based on their needs and thereby preserving decentralization across different use cases.

• Enhancing Compliance: As the DeFi market evolves, regulatory scrutiny has made compliance an essential factor. The introduction of USDS, a stablecoin backed by real-world assets (RWA), aims to meet global financial market compliance requirements, allowing USDS to achieve broader adoption and recognition.

• Improving Scalability: Under the current governance and product structure, DAI’s scalability is somewhat limited, particularly in competition with centralized stablecoins like USDT and USDC. The rebranded Sky not only introduces a new governance token, SKY, but also employs redesigned incentive mechanisms to encourage user participation. Additionally, with the introduction of more SubDAOs (Stars), Sky can respond to market demands more flexibly, driving innovation and expansion within the ecosystem.

II. Key Changes in MakerDAO's Upgrade to Sky

2.1 Rebranding: From MakerDAO to Sky

The rebranding of MakerDAO to Sky is not merely a change in name, but a comprehensive overhaul of the protocol’s architecture, governance structure, and ecosystem development. MakerDAO launched the new Sky protocol and related application platform Sky.money.

Through Sky.money, users can exchange their existing DAI stablecoin 1:1 for USDS or exchange ETH, USDC, or USDT for USDS on the official website. MKR governance tokens can be exchanged for SKY tokens at a ratio of 1:24,000. Sky also launched a double rewards program for SKY, allowing users to earn rewards by completing social media tasks and signing using their wallet for future deposits, though details have yet to be fully disclosed.

2.2 Introduction of USDS and SKY Tokens

The upgrade introduces two new tokens: USDS (upgraded DAI) and SKY (upgraded MKR). These tokens represent not only a name change, but also product-level innovations and restructuring.

1. USDS: USDS is a stablecoin backed by real-world assets (RWA), focusing more on compliance and scalability compared to DAI. Its asset-backed mechanism combines decentralized collateral with RWA support, reducing price volatility and offering stable returns to holders, making it an interest-bearing stablecoin.

USDS introduces a freeze function, similar to centralized stablecoins like USDT and USDC, allowing specific accounts to be frozen under certain conditions. Although this feature has yet to be activated, it has sparked widespread controversy within the community. Supporters argue that this ensures compliance with global regulatory requirements, while others believe it undermines the core principles of decentralized finance.

1. SKY Token: As the upgraded version of MakerDAO’s governance token MKR, SKY token comes with improvements in governance structure and incentive mechanisms. Each MKR token can be exchanged for SKY tokens at a 1:24,000 ratio, increasing governance token liquidity and lowering the participation threshold, allowing more users to engage in protocol governance.

SKY tokens currently offer dual incentives:

• Early Bird Rewards: Early users who register on Sky.money and complete specific tasks will receive double SKY token rewards, encouraging early adopters and supporting the protocol’s initial growth.

• Staking Rewards: SKY token holders can stake their tokens to participate in governance and earn additional rewards, with longer staking periods resulting in higher rewards to incentivize long-term governance participation.

2.3 New Decentralized Governance Framework

The rebranding to Sky also redefines decentralized governance. Sky Stars (SubDAOs) are the most important governance innovation within the Sky protocol, representing a collection of decentralized autonomous organizations (DAOs). Each SubDAO has its governance tokens and autonomy, independently managing its ecosystem while maintaining close ties with the Sky protocol. This diversified governance structure allows Sky to engage in flexible governance and innovation across different markets and scenarios.

• Spark DAO: The first project under Sky Stars, with its token SPK, aims to offer innovative DeFi lending products by leveraging Sky’s economic power to provide more competitive lending services. Users can participate in USDS and SKY incentive mechanisms to earn SPK tokens.

2.4 Scalability and Multichain Solutions

Sky protocol also enhances its scalability in the DeFi space by introducing multichain expansion and cross-chain bridging via Skylink. Skylink enables USDS, SKY, and other tokens to move freely across multiple blockchains, allowing Sky to interact seamlessly with other Layer 1 and Layer 2 blockchains. This boosts the protocol’s liquidity and cross-chain compatibility, providing users with more choices and efficient trading experiences.

III. The Endgame Plan and Dual Stablecoin Strategy

3.1 The "Stablecoin Trilemma"

The "Stablecoin Trilemma" refers to the difficulty of achieving three core goals—stability, decentralization, and scalability—simultaneously when designing stablecoins.

• Stability: Stablecoins must maintain stable prices to avoid the high volatility seen in cryptocurrencies. Price stability requires strong collateral or control mechanisms, often relying on centralized systems like bank accounts or fiat reserves, which conflict with decentralization.

• Decentralization: Decentralization means minimizing reliance on centralized entities or institutions for stablecoin management, ensuring censorship resistance and system autonomy. Decentralized systems often rely on trustless mechanisms, but this can weaken stability.

• Scalability: Scalability refers to the ability of stablecoins to rapidly expand to meet growing demand while keeping transaction costs low and speeds high. This often requires centralized off-chain systems for efficient management, but this undermines decentralization.

3.2 Core Goals and Steps of the Endgame Plan

Rune Christensen introduced the Endgame plan in October 2022, stemming from a deep reflection on the Stablecoin Trilemma and the complexity of MakerDAO’s governance. The plan aims to grow DAI’s supply to $100 billion.

The Endgame plan’s key objectives include:

• Introducing new tokens (NewStable and NewGovToken) to replace DAI and MKR.

• Establishing multiple SubDAOs, each with its governance structure and token, to develop different applications like DeFi products and real-world asset (RWA) support.

The Endgame plan consists of four major phases:

1. Launch Phase (Summer 2024): Unveil MakerDAO’s new brand and tokens (NewStable and NewGovToken), enabling users to upgrade their existing tokens, and launch the Locked Staking Engine (LSE) and NewBridge for cross-chain transfers.

2. Scaling Phase: Introduce six new SubDAOs, each focused on different fields such as RWAs and gaming.

3. NewChain Launch: Launch NewChain, MakerDAO’s own Layer 1 blockchain, to host core tokens and governance mechanisms, acting as a cross-chain hub.

4. Endgame: Permanently lock MakerDAO’s governance mechanism, creating a self-sustaining decentralized financial ecosystem.

3.3 The Introduction of the Dual Stablecoin Strategy

A key step in the Endgame plan is the introduction of a dual stablecoin strategy, addressing the Stablecoin Trilemma with two distinct stablecoins: NewStable (USDS) and PureDai.

• NewStable (USDS): Aims for large-scale adoption and integration with traditional financial systems. It’s backed by real-world assets (RWA), meeting global regulatory requirements, making it a more compliant decentralized stablecoin suitable for traditional financial institutions and a broader user base.

• PureDai: Emphasizes pure decentralization, accepting only decentralized assets (like ETH and stETH) as collateral. It adopts a floating price target mechanism, allowing its price to fluctuate based on market supply and demand rather than being pegged to fiat currencies like the U.S. dollar, thus maintaining maximal decentralization.

MakerDAO officially announced its rebranding to Sky in September 2024, marking an important step in the Endgame plan. This rebranding signifies not just a change in name but a comprehensive transformation in governance architecture, token economics, and the stablecoin system.

IV. Controversies and Challenges of the Rebranding

4.1 The Centralization vs. Decentralization Dilemma

One of the most discussed topics within the community is whether the protocol remains faithful to its decentralized core values. The introduction of the dual stablecoin strategy—USDS and PureDai—represents two distinct paths for MakerDAO’s development: decentralization and compliance.

While this dual strategy caters to different needs within the DeFi ecosystem, it also exposes the tension between scaling and decentralization. USDS makes MakerDAO more suitable for integration with traditional financial institutions, while PureDai attracts a more decentralized-focused, blockchain-native user base.

4.2 The Controversy Over the Freeze Function

The introduction of the freeze function in USDS has sparked widespread criticism. This feature grants the protocol or relevant governance entities the power to freeze users' funds in specific circumstances. While supporters argue this is necessary for compliance and preventing illegal activities, critics argue it goes against the core principles of decentralization.

In traditional financial systems, freezing accounts is a measure against criminal activity or major risks. Introducing this function into blockchain-based stablecoins raises concerns that users’ assets could be frozen without their consent, contradicting the original idea of cryptocurrencies, which is to give users complete control over their funds.

4.3 Geoblocking and Weakened Censorship Resistance

In addition to the freeze function, the Sky protocol introduces geographical restrictions, prohibiting users from certain regions from accessing the protocol. Specifically, USDS and the Sky protocol block users from bypassing these restrictions via VPNs.

This move is seen as a concession to regulatory pressure, leading many to question whether MakerDAO has compromised its censorship resistance and decentralized goals to appease regulators.

4.4 Community Divisions

Beyond technical and ideological debates, the rebranding has caused divisions within the MakerDAO community. Decentralization advocates tend to support PureDai, a fully decentralized stablecoin with no ties to real-world assets or governance. However, the launch of USDS signals a shift toward traditional finance, creating polarized splits within the community.

For many loyal MakerDAO members, PureDai represents the future they envisioned, adhering to the original decentralized ideals. Conversely, a more pragmatic faction believes that to grow and attract participation from traditional finance, compromises must be made between compliance and decentralization. This division could impact the unity of the community and shape the future direction of the protocol.

V. The Future of Sky and the Endgame Plan

5.1 The Development Potential of Sky

With MakerDAO’s rebranding to Sky and the introduction of new tokens USDS and SKY, the protocol’s direction has become more diverse and complex. This rebranding marks a significant step in aligning MakerDAO with traditional financial systems while retaining its commitment to decentralization. This dual-track strategy provides MakerDAO more market opportunities and lays a solid foundation for future development.

USDS, with its yield-bearing functionality, is expected to attract more DeFi users. As a decentralized protocol, Sky will offer savings rates and other DeFi products, allowing users to earn returns by holding and using USDS. This mechanism will help increase user engagement and boost USDS’s long-term holding volume, driving its market capitalization growth.

Although USDS has strong growth potential, it will face fierce competition from centralized stablecoins like USDT and USDC, which dominate the market. Standing out in this competitive landscape will be one of Sky’s major challenges.

5.2 Expansion of the SubDAO Ecosystem

Another key aspect of the Endgame plan is the expansion of the Sky ecosystem through the introduction of SubDAOs (Stars). These SubDAOs will focus on various verticals such as lending, gaming, and real-world assets (RWA), helping to diversify the Sky protocol’s development. Each SubDAO will have its governance token and economic system, fostering innovation in its respective field.

The first launched SubDAO is SparkDAO, focusing on expanding the protocol’s lending capabilities through innovative DeFi products like SparkLend. As the number of SubDAOs grows, Sky will form a decentralized ecosystem supporting independent development across different sectors.

This SubDAO architecture enhances Sky’s flexibility and offers diverse options to different investors and users, dispersing governance and risk. However, as the protocol expands, governance complexity and transparency issues may become bottlenecks in its further development.

5.3 The Future of the Endgame Plan

Since its introduction in 2022, the Endgame plan has gradually moved from concept to reality. In the future, the launch of a multi-chain architecture and NewChain will be another key focus. NewChain, as MakerDAO’s independent Layer 1 blockchain, will host the protocol’s core tokens and governance mechanisms, improving scalability and operational efficiency by removing reliance on a single Ethereum network.

The ultimate goal of the Endgame plan is to build a stable and sustainable DeFi ecosystem through a multi-layered decentralized architecture. In the fourth and final phase, known as the “Endgame,” MakerDAO’s core governance mechanisms will be permanently locked, creating a self-sustaining decentralized financial system. This will allow the Sky protocol to become a fully decentralized autonomous system, realizing the vision of complete decentralization.

In conclusion, the Endgame plan outlines a promising development path for MakerDAO. From the implementation of a dual stablecoin strategy to the expansion of the SubDAO ecosystem and governance reforms, MakerDAO must balance innovation while facing challenges such as community divisions, technical complexity, and regulatory pressures. Nevertheless, the successful implementation of the Endgame plan could position MakerDAO as a more resilient and scalable decentralized financial ecosystem, providing a diverse and flexible solution to the global financial system.

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