The renowned crypto initiative MakerDAO, which recently transitioned to the name Sky, is now contemplating a reversal and exploring alternative strategies. This reconsideration comes in the wake of disappointing outcomes from the rebranding campaign, which not only failed to generate the anticipated traction but also resulted in a decline in the value of the new token, SKY. Meanwhile, the stablecoin USDS, which has succeeded DAI, is showing promising performance metrics on-chain. Here are the details of the situation.
MakerDAO’s Shift to Sky: An Overview
In late August, MakerDAO, a prominent decentralized finance (DeFi) platform valued at $4.4 billion, unveiled its rebranding as Sky. This move was part of an “Endgame” strategy devised by founder Rune Christensen aimed at addressing increasing competition within the blockchain sector through a refreshed identity. With numerous successful applications emerging and drawing user engagement, MakerDAO sought to revitalize its ecosystem. Typically, such rebranding initiatives serve as a catalyst for conversation and engagement within the crypto community. Concurrently, incentive campaigns were organized to encourage new investments in Sky in exchange for yield opportunities.
The rebranding aimed to evolve MakerDAO into a more decentralized, secure, and user-friendly platform. The launch featured a revamped website designed with a more streamlined and intuitive interface. Sky promotes itself as a user-friendly platform that rewards saving while allowing users to retain control over their assets. The transition also involved the rebranding of the MKR token to SKY, enabling holders of the previous token to exchange it at a ratio of 1:24,000, receiving 24,000 SKY for each MKR. Meanwhile, DAI, the ecosystem’s decentralized stablecoin, transformed into USDS at a 1:1 ratio, unlocking new functionalities on-chain. Additionally, the Maker SubDAOs, previously known as independent protocol units like Spark, were rebranded as “Sky Stars.” During this crucial transition, Rune Christensen expressed optimism to the community, stating, “Sky represents the complete transformation of Maker, encompassing all the knowledge that the organization has gathered over the years.”
Sky’s Price Decline: The Challenges Faced
Despite the ambitious rebranding efforts, the outcome has not met expectations, with the SKY token’s launch being perceived as a failure. Speculatively, the change in the governing token’s name from MKR to SKY did not help boost its market value. Since the token’s debut on September 24, its price has plummeted by 26.8%, dropping from $0.066 to $0.049. The performance of the SKY token has significantly lagged behind that of Bitcoin and other prominent DeFi tokens like AAVE, UNI, and LINK.
The rebranding strategy attempted to exploit a psychological trading phenomenon, wherein investors might view a lower-priced token as more appealing than a higher-priced one. While the value of a cryptocurrency should be assessed based on market capitalization, many investors mistakenly believe that a token with a lower base price has more potential for exponential growth. This principle is often seen in the realm of memecoins, where tokens are frequently listed with multiple zeros. The MKR token, priced at $1,175, is perceived as ‘too expensive,’ which complicates its growth narrative. However, this tactic did not yield the desired results; the strategy of justifying the lower price of the new SKY token through its high supply failed to bring success to MakerDAO. The total supply of SKY is 23.4 billion tokens, in stark contrast to the 1 million MKR tokens, leading some users to possibly recognize this strategy and disengage from the project.
MakerDAO’s Consideration of Rebranding Reversal
In light of the initial setbacks from the rebranding initiative, MakerDAO is now contemplating the possibility of reverting to its original brand. Founder Rune Christensen acknowledged that his team may have overly relied on aggressive marketing tactics that did not align well with the project’s core values. He also emphasized the respect and trust the Maker brand holds within the DeFi community, suggesting a potential return to its roots. Discussions within the MakerDAO governance forum revealed sentiments such as: “Now it is clearer than ever how much the DeFi community loves and trusts the Maker brand. There was a lot of affinity for the brand and what it represents: stability, security, and DeFi scale.” In the initial month following the transition, a total of 78,300 MKR tokens were exchanged for approximately 2 billion SKY, indicating a reluctance among users to embrace the new name.
Christensen noted that several options are being explored to tackle the current challenges. One consideration is to continue with the Sky brand and enhance its appeal through new community initiatives. Alternatively, the team may revert to the MKR name as the sole governance token, reaffirming Maker’s foundational values. Lastly, there’s the possibility of developing a new brand that resonates with the principles of trust and stability within the crypto space.
USDS: The New Stablecoin and Its Implications
The lukewarm reception of the Sky brand may stem partly from community backlash against a contentious update. As part of the rebranding, a new stablecoin was introduced to replace DAI, now named USDS, with a 1:1 conversion rate. However, this transition has introduced centralization features, diminishing one of the key attributes of the stablecoin. Notably, the capability to “freeze” assets at specific addresses has been incorporated at the discretion of the code holder, mirroring practices seen in centralized stablecoins like Tether. While this function is intended for use during hacking incidents or significant security breaches, it nevertheless poses a challenge to the concept of decentralization. In spite of these concerns, USDS provides incentives for users willing to engage with the rebranding, offering a 6.5% APR on deposits through the “Sky Saving Rate” platform.
Christensen has announced a community call scheduled for November 4th, intended to gather input on the rebranding and evaluate potential future directions for MakerDAO.
