Sky (formerly MakerDAO) governance is grappling with the implications of an emergency proposal executed today that alters MKR’s role within the ecosystem. These changes were initially hailed as necessary to safeguard protocol security. However, their rapid approval has sparked debates about transparency, the integrity of processes, and risk implications for DAI/USDS.
The proposal eliminates the longstanding 5% exit fee on MKR withdrawals, significantly expands borrowing against MKR collateral and raises borrowing rates — while simultaneously lowering liquidation thresholds. The critics claim that these changes increase the risk associated with the protocol, especially since MKR currently has one of DeFi’s highest loan-to value (LTV).
The rationale for these decisions has been questioned by community members. Some people raised questions about the timing. They suggested that the proposal had been pushed forward with little explanation, just when critics of governance were silenced.
Rune Christensen defended Sky’s move during a Wednesday community call. The founder of Sky, Rune Christensen, defended the move in a community call on Wednesday. He said that it was necessary to stop a takeover. He claims in Discord posts and X messages that PaperImperium is a pseudonym used by GFX Labs, a well-known activist investor, who also participates in Sky’s governance, as well as a group investors looking to exert influence over Maker.
According to a leak, other prominent Sky voices have also linked Nexo with the project.
Vance Spencer of Framework Ventures, who has been a Maker bull for many years, mentioned Zeus Capital when referring to the Governance kerfuffle. Zeus Capital was previously associated with Nexo.
PaperImperium’s response cited its long-standing record of contributing positively to DAO Governance. “GFX has not agreed to work with Nexo beyond listening to their opinions and sharing ours,” Noting that they tend to be willing “to talk to anyone requesting a meeting or open channel of communication in any DAO we work in,” He told Blockworks.
Nexo’s spokesperson replied that “Nexo’s team is on the way back from [Hong Kong],” However, they are not available immediately to refute any allegations.
“Historically, Nexo is the largest client of Maker and we have consistently tried to proactively contribute to its long-term growth by engaging with their team. We will release an exclusive, in-depth overview of the protocol’s intricacies, decentralization shifts and evolving dynamics, providing and critical insights,” The spokesperson stated.
PaperImperium has a reputation for being active in debates about governance and for pushing transparency reforms. Sky Governance practices have been criticized by the account, which has often questioned decisions that concentrated power in insiders.
Christensen claims that these adjustments are part of a larger effort to streamline the Seal Engine and increase governance efficiency. This was outlined by Christensen in a post posted on the forum Wednesday. Seal Engine, a Sky component that lets anyone lock their MKR to USDS as collateral for borrowing them, is part of the Seal Engine. Christensen explained that the elimination of exit fees reflects a move towards reducing governance complexity. SKY owners would primarily be delegating decisions to Core executors.
Defenders like “chud” on Discord pointed out that the proposal wasn’t just about raising debt ceilings — it also increased the stability fee from 12% to 20%, making borrowing against MKR more expensive.
Christensen is subjected to Aave’s more conservative LTVs, and the liquidation thresholds for Morpho. Sky’s more flexible borrowing conditions could allow him to shift his influence from the third-party platform and towards Seal Engine.
This could reduce his risk of liquidation on Aave/Morpho — which was allegedly part of the governance takeover plot (though one which Christensen characterized as “laughable”).
“Rune refinanced his debt from Morpho/Aave and consolidated it on Maker, where his collateral can vote,” PaperImperium stated.
“GFX would never support putting a protocol or its users at risk,” “He said” referring to the issue “a typical DAO governance dispute about policy.”
The community has many pressing questions as the dust settles: Did the emergency proposal actually aim to secure Sky’s long-term future or more so consolidate control? If governance processes are bypassed this easily, how can it be prevented from occurring again?
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