Emergency Sky proposal sparks governance debate

The proposal rewrites USDS borrowing rules for MKR holders — a strategic voting maneuver by founder Rune Christensen

article-image

Sky (formerly Maker) founder Rune Christensen | Ben Solomon Photo LLC for Blockworks

share

Sky (formerly MakerDAO) governance is grappling with the implications of an emergency proposal executed today that alters MKR’s role within the ecosystem. Pitched as a necessary move to protect protocol security, these changes’ swift approval has instead ignited debates over transparency, process integrity and the risk implications for DAI/USDS.

The proposal eliminates the longstanding 5% exit fee on MKR withdrawals, significantly expands borrowing against MKR collateral and raises borrowing rates — while simultaneously lowering liquidation thresholds. Critics argue these measures increase the protocol’s risk of exposure, particularly given that MKR now has one of the highest loan-to-value (LTV) ratios in DeFi.

Community members have questioned the rationale behind these decisions. Others raised concerns over the timing, suggesting that the proposal was pushed through with minimal explanation just as governance critics were being silenced.

Rune Christensen, Sky’s founder, defended the move in a community call on Wednesday. He argued the changes were necessary to prevent a governance takeover. In Discord and X posts, he alleges a cooperation between PaperImperium, the pseudonym of a known activist investor with GFX Labs and governance participant in Sky, and a group of investors hoping to wield influence in Maker.

Other prominent voices within Sky have linked Nexo to the effort, citing a leaked plan.

Framework Ventures general partner Vance Spencer, a long time Maker bull, referenced Zeus Capital in connection with the governance kerfuffle. Zeus Capital has been associated with Nexo in the past.

In response, PaperImperium cited a long track-record of positive contributions to DAO governance. “GFX has not agreed to work with Nexo beyond listening to their opinions and sharing ours,” noting they are generally willing “to talk to anyone requesting a meeting or open channel of communication in any DAO we work in,” he told Blockworks.

A Nexo spokesperson responded that “Nexo’s team is on the way back from [Hong Kong],” and thus not immediately available to rebut the allegations.

“Historically, Nexo is the largest client of Maker and we have consistently tried to proactively contribute to its long-term growth by engaging with their team. We will release an exclusive, in-depth overview of the protocol’s intricacies, decentralization shifts and evolving dynamics, providing and critical insights,” the spokesperson said. 

PaperImperium is known for frequently engaging in governance debates and pushing for transparency reforms. The account has been vocal about Sky governance practices, often criticizing decisions that concentrate power among insiders.

Christensen maintains that the adjustments align with a broader effort to simplify the Seal Engine framework and improve governance efficiency, as outlined in a forum post on Wednesday. The Seal Engine is a component of Sky that allows anyone to lock MKR tokens as collateral to borrow USDS. The elimination of the exit fee reflects a shift toward reducing governance complexity, as SKY holders would primarily delegate decisions to Core Executors, Christensen said.

Rather than conferring an insider benefit, defenders such as “chud” on Discord pointed out that the proposal wasn’t just about raising debt ceilings — it also increased the stability fee from 12% to 20%, making borrowing against MKR more expensive.

Christensen has significant MKR-backed loans on Aave and Morpho, where he’s subject to those platforms’ more conservative LTVs and liquidation thresholds. By allowing more aggressive borrowing terms within Sky, he could shift his leverage away from third-party platforms to the Seal Engine.

This could reduce his risk of liquidation on Aave/Morpho — which was allegedly part of the governance takeover plot (though one which Christensen characterized as “laughable”).

“Rune refinanced his debt from Morpho/Aave and consolidated it on Maker, where his collateral can vote,” PaperImperium said.

“GFX would never support putting a protocol or its users at risk,” he said, calling the matter “a typical DAO governance dispute about policy.”

As the dust settles, the community is left with pressing questions: Was the emergency proposal truly about securing Sky’s future, or rather a consolidation of control? And if governance processes can be bypassed in this way once, what’s to stop it from happening again?


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

Also, only three tokens have outperformed bitcoin so far this year: XMR, HYPE and SKY

article-image

The fund group has submitted proposals in recent months for other funds that would hold litecoin, solana, XRP, HBAR, Sui and others

article-image

Momentum’s back — BTC leads, risk assets follow

article-image

Ondo Finance’s acquisition of blockchain development company Strangelove follows its buy of Oasis Pro

article-image

Cryptocurrency and stock traders alike had a lot to unpack Wednesday

article-image

The government says Storm was a money-hungry aid to criminals; the defense says it’s not his fault that people used his code for illicit activities.