Governance Turmoil at Sky: A Potential Power Seizure?
Sky, previously known as Maker, is once again embroiled in a governance controversy, with opinions divided on whether recent actions constitute a dangerous power grab or a legitimate governance maneuver. The discussion ignited when PaperImperium, a long-standing member of the Maker community and a frequent critic of its recent strategic shifts, voiced concerns on X regarding a hastily proposed governance initiative. This proposal aims to ease restrictions on borrowing against the MKR governance token. According to PaperImperium, the proposed changes “bypassed due process,” potentially doubling the credit line available for MKR holders and increasing the loan-to-value (LTV) ratio from 50% to 80%. Additionally, PaperImperium alleged that they, along with GFX Labs, had been barred from participating in the governance forum during the proposal’s discussion.
Emergency Proposal Sparks Debate
An emergency proposal surfaced yesterday on the MakerDAO @skyecosystem forum and voting portal. This proposal, which has already passed but is awaiting a timelock, significantly enhances both the lending limits and LTV that Maker will provide against its governance token. The proposal has drawn significant attention, especially considering the implications it carries for the community.
Concerns Over Governance Integrity
Beyond the immediate financial implications, there are broader concerns regarding risk management and censorship. Critics argue that bypassing established governance protocols could undermine Maker’s reputation for methodical and transparent governance, which is underpinned by its legal framework. The discussion quickly gained traction within decentralized finance (DeFi) communities, with comparisons being made to the controversial actions taken by Curve Finance founder Michael Egorov. Egorov faced severe repercussions after borrowing substantial amounts of stablecoins against highly leveraged CRV collateral, resulting in his liquidation across various DeFi lending platforms last June.
Context of the Emergency Proposal
The backdrop against which this emergency proposal was introduced has been notably absent from the original discussions. While the proposal claims to enhance flexibility and responsiveness to potential threats while ensuring community oversight, it raises alarms about possible “malicious governance actions.” These concerns appear to be based on “screenshots and whistle-blower reports,” although the proposal suggests that the likelihood of such actions succeeding is minimal. Despite calls for additional clarification, the proposal was approved before further details could be provided.
Allegations of Governance Takeover
Screenshots referenced in the debate were shared by Sam MacPherson, CEO of Phoenix Labs and a former Maker contributor. These images reportedly outline a strategy to amass MKR voting power to execute a governance “takeover.” Further discussions include Maker founder Rune Christensen’s alleged intentions to enforce liquidations of MKR positions, ostensibly to acquire governance tokens at a lower cost, backed by a reportedly dubious capital fund with a track record of exploiting DeFi systems.
Debate on Governance Accumulation
This situation is not unprecedented in the DeFi landscape, where on-chain governance systems frequently confront challenges related to the concentration of voting power. In 2023, projects like Rook and Aragon faced scrutiny from a group known as the RFV Raiders, which targeted DAOs holding treasuries that exceeded the value of a controlling interest in governance tokens. In response to a coordinated assault by this group, the Aragon Association repurposed its DAO into a grant program to safeguard its treasury.
Previous Governance Controversies
Last year, Compound DAO also faced significant scrutiny when it approved a proposal to transfer half a million COMP tokens, valued at $25 million at that time, to a newly established vault controlled by the “Golden Boys,” a group that had amassed sufficient tokens to push through the changes. Although the group’s leader, Humpy, faced accusations of misappropriating funds, he defended the legitimacy of their actions, asserting that the “Trust Setup” multisig would only allow fund withdrawals with DAO approval.
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