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MakerDAO Community Proposal To Replace MKR Governance Token

by John Hensley
MakerDAO Community Proposal To Replace MKR Governance Token

The idea proposes the creation of a new stkMKR token that would serve as a bonding asset for MKR staked in governance initiatives.

MakerDAO’s decentralized stablecoin platform is considering a dramatic tokenomics move to see its governance token, Maker, replaced (MKR).

On Monday, community leader monet-supply posted a proposal on the MakerDAO forum proposing an alternate token economic process. The protocol could replace its existing governance token, MKR, with a new token called stkMKR if the proposal passes a full governance vote.

Within a few hours of its posting, the idea received a slew of replies, the majority of which were positive and focused on the technical aspects of the solution. The proposal and debate stage must be presented as a Maker Improvement Proposal (MIP) to MKR holders for a formal vote, which typically takes two weeks.

The current tokenomics paradigm, which runs on a “buyback and burns” mechanism, has some flaws and inefficiencies, which the staking solution overcomes. Monet-supply claims that the existing mechanism has various flaws, including a lack of tailored incentives because buyback and burn return all cash to MKR holders.

According to monet-supply, there is also a “poor crypto narrative,” and MKR issuance might be used to improve the system. The existing system also has limited deterrence against attacks on governance or vote-rigging.

The proposed solution is a new stkMKR coin that would take the place of MKR as MakerDAO‘s fundamental governance token. It would function as a staking or bonding token for MKR holders who had deposited the currency for governance purposes.

According to Monet-supply, the rewards process has been modified, and there will be more incentives to stake utilizing the new approach.

Users can deposit crypto assets as collateral to generate the decentralized stablecoin Dai using MakerDAO (DAI). This can then be applied to other Decentralized Finance (DeFi) protocols or liquidity pools. The DAI is burned when the “loan” is repaid, and the collateral is removed.

According to CoinGecko, MKR prices remained unchanged on the day at $1,766 at writing. However, the token has declined 11% in the last two weeks and is now down 72% from its all-time high of $6,292 in May 2021.

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