MakerDAO / Sky: The Pioneer DeFi DAO and the DAI Stablecoin
MakerDAO / Sky: The Pioneer DeFi DAO and the DAI Stablecoin
MakerDAO is not merely one of the oldest DeFi protocols. It is, in many meaningful respects, the protocol that established the template for how a decentralised autonomous organisation can govern a live financial product serving billions of dollars in user demand. Its decade-long evolution — from a small group of early crypto developers building a decentralised stablecoin, through one of the most active on-chain governance systems in existence, to the ambitious Endgame restructuring that rebranded the entire system as Sky in 2024 — is the foundational case study in DeFi DAO governance.
Origins and Founding Vision
Rune Christensen founded Maker in 2014 with a vision that was audacious and specific: create a decentralised stablecoin — a crypto asset pegged to the US dollar but not backed by any centralised institution, not subject to censorship or seizure, and governed by its community rather than any corporation.
The core insight was that a decentralised stablecoin required decentralised backing. Centralised stablecoins (like USDT, which already existed in nascent form) were simply IOUs from a company holding dollars in a bank account. Maker’s approach was different: create a system where users deposit crypto collateral — initially ETH — in excess of the stablecoin’s value (overcollateralisation), and mint DAI against that collateral. If the collateral value falls, the system automatically liquidates the position before DAI becomes undercollateralised. No company, no bank account, no trust required — just math and smart contracts.
The Dai stablecoin launched in December 2017, and it worked. DAI has maintained its dollar peg through multiple severe crypto market downturns, including the March 2020 crash that tested the liquidation machinery under extreme stress. The system survived.
Protocol Architecture: How Maker Works
The Maker Protocol is a collateralised debt position (CDP) system — now called Maker Vaults. Users deposit approved collateral assets and draw DAI loans against that collateral, maintaining a collateralisation ratio above the required minimum. If a vault’s collateralisation ratio falls below the liquidation threshold, the vault is liquidated: the collateral is auctioned, the DAI debt is repaid, and the vault owner receives whatever collateral surplus remains.
The key parameters governing this system — which collateral types are accepted, what the collateralisation requirements are, what the stability fee (interest rate) is for each collateral type, what the debt ceiling for each collateral type is — are all determined by MKR governance.
This is the essence of MakerDAO: the governance token (MKR) grants holders the authority to set the parameters of a live financial system serving billions of dollars in outstanding stablecoin debt. Getting these parameters wrong has real consequences: too low a stability fee and the system accumulates risk without adequate revenue; too high a collateralisation requirement and the system becomes capital-inefficient and uncompetitive.
The MKR Governance Token
MKR is simultaneously a governance token and a system recapitalisation backstop. In normal operation, MKR holders vote on protocol parameters. When the system operates profitably — when stability fee revenue exceeds operational costs — surplus DAI is used to buy and burn MKR, reducing supply and creating value for MKR holders.
When the system operates at a loss — when collateral liquidations generate insufficient DAI to cover the outstanding debt — new MKR is minted and sold to recapitalise the system. This creates a powerful incentive alignment: MKR holders capture protocol upside through buybacks and bear protocol downside through dilution. MKR holders are the equity holders of the Maker Protocol in a meaningful economic sense.
On-Chain Governance: Among the Most Active in DeFi
MakerDAO’s governance is conducted via the Maker Governance portal and executed on-chain via the Maker governance contracts. The governance process is multi-stage:
Signal Request: Any community member can open a Maker governance forum discussion to gauge sentiment on a proposed change.
On-Chain Poll: Executive votes are preceded by non-binding polls that run for a defined period and measure rough community sentiment.
Executive Vote: Executive votes are continuous approval votes — MKR holders lock MKR into the governance contract to vote for specific executive spells (smart contract code changes). The spell that accumulates the most MKR support wins. Once the winning spell has accumulated sufficient MKR, it is passed and queued in the Governance Security Module (GSM) — a 48-hour timelock — before execution.
The 48-hour GSM timelock is a critical security mechanism: if a malicious executive vote passes (through governance attack or negligence), the community has 48 hours to identify the problem and take protective action, including triggering the Emergency Shutdown Module.
MakerDAO’s governance has produced hundreds of executive votes across its history: adding collateral types (WBTC, LINK, Uniswap LP tokens, real-world assets), adjusting stability fees as market conditions change, setting debt ceilings for each vault type, managing surplus buffers, and executing the substantial structural changes of the Endgame program.
The Real-World Asset Revolution
Perhaps MakerDAO’s most significant governance innovation — and its most consequential strategic move — was the decision to accept real-world assets as collateral for DAI minting.
The pivot began in 2021-2022, driven by a core insight: if Maker holds US Treasury bonds as collateral, those bonds generate the risk-free rate of return (4-5%+ in 2022-2024). That yield makes the Maker system dramatically more profitable than a system backed exclusively by volatile crypto assets. And US Treasury bonds are significantly less volatile than ETH, reducing liquidation risk.
The implementation was complex — tokenising real-world assets requires legal structures, trust counterparties, and regulatory engagement that pure DeFi does not — but Maker governance navigated it. By 2023, Maker held over $1 billion in real-world asset collateral, primarily through structured credit facilities and direct US Treasury bond allocations. The protocol earned hundreds of millions in RWA yield, funded by the same governance system that MKR holders had built over years.
This represented a genuine breakthrough: a decentralised protocol, governed by token holders on-chain, managing a multi-billion dollar portfolio that included both crypto-native assets and traditional financial instruments. No other DeFi protocol has done this at comparable scale.
The Endgame Plan and Rebranding to Sky
In 2022-2023, Maker’s founder Rune Christensen proposed the Endgame Plan — a comprehensive restructuring of the Maker system into a new architecture of SubDAOs. Under Endgame, the monolithic MakerDAO would be reorganised into specialised sub-organisations (“SubDAOs”) focused on specific functions: lending, RWA management, stablecoin reserves. Each SubDAO would have its own governance token and its own governance autonomy, while remaining connected to the core Maker system.
The rationale was complexity management: as Maker’s scope expanded (collateral types, RWAs, multichain deployment, cross-protocol integrations), the cognitive and governance load on MKR holders became unmanageable. SubDAOs would allow specialisation and focused governance expertise.
In 2024, the rebranding executed: MakerDAO became Sky. The DAI stablecoin gained a companion stablecoin, USDS. The MKR governance token gained a conversion path to SKY tokens at a fixed ratio. The Maker governance system migrated to the Sky governance system.
The rebranding has been controversial among long-standing MakerDAO participants, some of whom view the Endgame restructuring as an overcomplicated governance experiment imposed top-down by the founder rather than emerging organically from token-holder governance. The debate about Endgame — its merits, its risks, and whether it represents genuine decentralisation or recentralisation under different branding — is among the most significant ongoing governance discussions in DeFi.
Revenue and Financial Performance
MakerDAO/Sky is one of the most financially successful DeFi protocols by revenue. Protocol revenue — stability fees earned from vault users, RWA yield, and other fee sources — has exceeded $200 million annually in peak periods. This revenue funds MKR buybacks (when the surplus buffer is full), protocol development, and governance infrastructure.
The financial strength of the Maker system has made it a reference point for institutional DeFi discussion: a decentralised protocol, governed on-chain, generating meaningful protocol revenue, and managing billions in diversified assets. Whatever the outcome of the Endgame restructuring, the underlying financial model that Rune Christensen designed in 2014 has proven remarkably durable.
Swiss Relevance
The Maker Foundation — the centralised company that developed the initial Maker Protocol before transitioning governance to MKR holders — was a Swiss-registered entity (Cayman-based foundation company with Swiss operational presence in some periods). The governance transition from Maker Foundation to fully decentralised MKR governance was among the first serious exercises in deliberately dissolving a centralised entity and transferring authority to an on-chain DAO. That transition, and the legal and operational complexity it involved, set a template that other DeFi protocols have followed.
Looking Forward
Sky in 2025-2026 is executing the SubDAO launch, expanding USDS adoption, and managing the RWA portfolio through a period of changing interest rate dynamics. The central question is whether the Endgame architecture delivers on its promise of decentralised, specialised governance at scale — or whether the complexity of the SubDAO system creates coordination failures that undermine the protocol’s coherence.
For governance researchers and DAO analysts, Sky/Maker remains the essential reference: the protocol that proved decentralised stablecoin governance was possible, and the longest-running laboratory for what on-chain DAO governance looks like at full institutional scale.
This profile is informational only and does not constitute investment advice.
Published by The Vanderbilt Portfolio AG, Zurich, Switzerland. Author: Donovan Vanderbilt.
Related Coverage
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- Swiss Legal Structures for DAOs: Verein, Stiftung, and the Complete Framework