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Writer's pictureIshita Bora

MakerDAO Community Proposal Introduces New stkMKR Token



MakerDAO community is mulling over a major tokenomics shift that could replace its governance token, Maker (MKR), as the community was made on the MakerDAO forum by community leader monet-supply on Monday, outlining an alternative token economic mechanism. If the proposal passes a full governance vote, the protocol could replace its current governance token, MKR, with a new token called stkMKR.


It has been reported that there were many responses to the proposal within just a few hours of it being posted, most of which were positive and regarding the technicalities of the solution. The proposal and discussion stage will need to be submitted as a Maker Improvement Proposal (MIP) for a formal vote by MKR holders, which usually takes two weeks.


However, the staking proposal addresses some issues and inefficiencies with the current tokenomics model, which operates a “buyback and burn” mechanism. It was suggested by monet-supply that there are several drawbacks to the existing mechanism including a lack of targeted incentives since buyback and burn returns all capital to MKR holders.


The report said that there is also a “weak crypto narrative,” according to monet-supply, who said that MKR issuance could be put toward improving the protocol. The current system also has limited deterrence against governance attacks or voting manipulation.

Likewise, the proposed solution is a new stkMKR token which would replace MKR as the core governance token of MakerDAO. It would act as a staking or bonding token issued to those who have deposited MKR for governance purposes.


The announcement stated:

“stkMKR will be non-transferable, and represents MKR staked in governance. Staked tokenholders will receive a share of MKR tokens purchased through surplus auctions, so stkMKR will be backed by an increasing amount of MKR over time.”

Monet-supply said that the rewards mechanism has been improved upon and there will be greater incentives to stake using the new system. MakerDAO allows users to deposit crypto assets as collateral to generate the decentralized stablecoin Dai (DAI). This can then be used elsewhere such as other decentralized finance (DeFi) protocols or liquidity pools.


Thus, the DAI is burnt when the “loan” is repaid and the collateral is withdrawn. MKR prices were trading flat on the day at $1,766, as of March 16. The token has dropped 11% over the past fortnight and is currently down 72% from its May 2021 all-time high of $6,292.


Source: Cointelegraph


 

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