30s Summary

Rune Christensen, co-founder of Sky (formerly MakerDAO), is devising a “strictly deflationary tokenomics” plan to halt the production of tokens, thereby decreasing supply and increasing stability while combating inflation. The plan involves a burn mechanism and introduces a reward system to incentivize participation and enhance token value. However, in the event of an emergency that threatens the stability of stablecoins USDS or Dai, the creation of new tokens is permissible. The proposal precedes a governance vote from November 11-14 determining whether Sky or MKR will be the central token.

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Rune Christensen, one of the founders of Sky (which used to be known as MakerDAO), is putting together a plan known as “strictly deflationary tokenomics”. Basically, this means that no more tokens would be produced and the total amount would start to go down.

The aim of Christensen’s plan is to stop the production of tokens regardless whether the central token stays as Maker (MKR) or changes to SKY, tracking with the new name.

This would make sure that there’s a long-term decrease in supply and a burn mechanism, so it aligns with the original model for MakerDAO’s tokens.

By putting forward this plan, they’re looking to make the original model stronger. It will drive a further decrease in supply and contribute towards greater stability and less inflation.

This “strictly deflationary tokenomics” model that Christensen wants to put in place focuses on using a “burn-only” deflationary model, which means that the supply of the core token would gradually be decreased through a systematic burn mechanism.

Under normal circumstances, no new tokens would be made, so the supply would naturally decrease. However, there would be one special case that allows for further tokens to be made: if there’s an emergency.

Now by “emergency”, Christensen means a situation that could cause stablecoins USDS or Dai (DAI) to be at risk of insolvency. This could happen if there’s a shortfall of collateral, in other words, if there’s not enough assets to cover debts.

As well as the model to decrease supply, Christensen’s plan also includes a reward system to encourage participation and boost token value.

Whether the central token stays as MKR or turns into SKY, the rewards system would enable holders to earn “Star Token Rewards”, like Spark SPK, through Activation.

Christensen has mentioned that those committed to using “Seal Engine” in governance can also receive “more valuable rewards of both Star Tokens and USDS Rewards.”

This new proposal comes before a governance vote planned to happen between Nov. 11 and 14, where those with a stake in the process will decide whether MKR or SKY should be the central token.

This vote is happening after the community thought about going back on its decision and going back to its original name, Maker, after a shaky reception and confusion over its August rebrand to Sky.

In a Nov. 4 X post, Christensen said this latest proposal would allow the ecosystem to “move forward and focus on growing the fundamentals” through renewed clarity for the protocol’s future direction.