The Decentralized Finance (DeFi) lending platform is about to undergo a major protocol change. In a proposal shared on May 1 via the Sky DAO forum, the team has outlined plans to phase out Maker’s MKR token in favor of its native governance token, SKY, which will become the primary token for staking and governance going forward.

If the community gives the green light, this transition will take place between May 15 and May 19. One of the key changes? Users will no longer be able to convert SKY back to MKR — a feature that, according to the team, has been holding back exchange adoption.

Co-founder of Sky Rune Christensen called the plan a "huge milestone" and said he fully supported it. He emphasized that removing the downgrade path could unlock faster adoption by centralized exchanges, which have been cautious due to concerns about liquidity fragmentation.

"A major constraint has been permitting downgrades from SKY to MKR," Christensen clarified.  "With this adjustment, exchanges should adopt SKY more quickly without worrying about liquidity fragmentation."

Alongside the token switch, the upgrade will also introduce staking for SKY holders, letting them earn rewards from the protocol’s revenue. To ensure a smooth transition, liquidations will be temporarily paused during the switch, reducing the risk of instability from price swings.

These updates are part of Sky’s broader strategy to operate with zero fixed costs by the end of 2025, unlocking long-term benefits for SKY holders through buybacks and staking incentives.

If approved, the proposal will represent a pivotal step in Sky’s evolution, streamlining governance and boosting its standing in the DeFi ecosystem. All eyes are now on the community vote to see what the future holds.