Christensen Finds the Right Balance between Governance and User Choice as Freeze Function Is Debated in New Sky Protocol
Sky, formerly known as MakerDAO, is facing scrutiny from its community over the potential inclusion of a freeze function in its upcoming USDS stablecoin. Co-founder Rune Christensen confirmed that while the function will not be activated during the launch on September 18, the proposal has raised concerns about the centralization of the Sky ecosystem.
Christensen, in an interview with Decrypt during Korea’s Blockchain Week, addressed these concerns and defended the freeze function as a necessary tool for regulatory compliance in jurisdictions where the stablecoin is backed by real-world assets. He emphasized the importance of using real-world assets to scale the system and stabilize the protocol.
The ability to freeze transactions is not unique to Sky, as other major stablecoins like USDT and USDC have similar mechanisms to comply with regulations and respond to suspicious activity. Christensen explained that as a DeFi project engages with real-world assets, it must work with governments and legal systems to protect its assets.
However, Christensen assured the community that any decision to activate the freeze function would be made through a governance-driven process. The community will have the opportunity to vote on its implementation, highlighting the protocol’s commitment to decentralization.
In addition to the freeze function debate, Sky has introduced a new governance model based on subDAOs, which are now called Sky Stars. These autonomous entities specialize in regional compliance while remaining part of the broader Sky protocol. Each Star operates independently, managing its own governance, treasury, and specialization.
To make DeFi more accessible to mainstream users, Sky is launching sky.money, an app that offers features like the Sky Savings Rate and Sky Token Rewards. Users holding USDS can earn a 6% annual interest through the savings rate and receive SKY tokens as rewards for engaging with the protocol’s governance or upgrading from Dai to USDS.
Despite these new features, Christensen clarified that users are not obligated to migrate from Dai to USDS. Dai and MKR will continue to exist, with liquidity shared between them and the new tokens. This approach allows users to choose between the current system and the upgraded USDS and Sky features based on their preferences.
Christensen emphasized the importance of integrating with the existing financial system while acknowledging the increased regulatory considerations that come with it. Striking the right balance between user convenience and regulatory compliance is a key focus for the co-founder and the Sky protocol.