For years, both Maker (MKR) and now Sky (SKY) have been portrayed as cases of “asymmetric undervaluation” — protocols whose intrinsic value and sophistication are not reflected in their market capitalization. This narrative has become almost axiomatic within the community, often framed as a failure of perception or communication: the market simply “doesn’t get it.”

But perhaps the problem is not perception — it’s design. The truth may be that this so-called undervaluation is endogenous, not accidental. It stems from a long sequence of strategic and governance choices that have systematically redirected value away from the token, weakening its economic reflexivity and undermining the incentives to hold it.

From the earliest iterations of Maker’s fee model and surplus management to Sky’s reward structures, capital allocation, and the architecture of its Stars and Agents, the same pattern persists: a remarkable focus on protocol resilience and ecosystem growth, but often at the expense of tokenholder alignment. The result has been a system that functions beautifully as infrastructure — but poorly as an investment.

This article challenges the common “undervaluation thesis.” Instead of assuming the market is wrong, we will explore how past design choices have disincentivized investment in MKR and now SKY, and how that could be reversed through a clearer alignment between protocol success and token value accrual.

One of the earliest and most significant shifts in the Maker → Sky transition came from the change in its monetary design.
The original MKR supply cap of 1,000,000 tokens served as a clear and powerful signal for investors: scarcity and long-term value alignment. It was a visible, quantitative anchor — easy to communicate and easy to model.

That anchor has been lost. During Sky’s evolution, the governance community approved what effectively amounted to an open-ended issuance, with an initial framework allowing for up to 600 million new SKY per year — a move later reversed, but not before the narrative damage was done. The current total supply, 23,462,665,147 SKY, stands just below the intended “round” issuance target of 24 billion, but far above what the fully deflationary path implied by MKR burn would have delivered. In fact, had the previous MKR burn mechanism been honored in full, the outstanding supply today would likely sit below 21 billion SKY.

This means that, even though the unlimited minting framework was repealed, new SKY tokens have effectively been issued, offsetting part of the prior MKR burn and executing a de facto capital expansion. From a corporate finance perspective, this is not necessarily negative — many companies issue new equity to fund growth — but it changes the signal. It tells the market that the project needs investment, not that it is in a position to return value to investors.

For a protocol whose value proposition relied on credibility, predictability, and disciplined monetary policy, this shift from scarcity to elasticity eroded one of its strongest fundamentals. It weakened the token’s narrative reflexivity: when price no longer reflects scarcity, it stops being a credible store of expected future cash flows.

Let me share with you an analysis of the SKY issuance strategy. Given that interest rates can be modified, it clearly depends a lot on the strategy the project follows. Currently, if I’m not mistaken, the DSR yield is negative for the project, but it’s compensated because only a part of the DAIs are deposited. I believe it would be more profitable to incentivize the use of new USDs externally because it has more profitability for the protocol. Although, of course, delivering a yield is an import…

MakerDAO Endgame: Launch Season [endbook1] Endgame is a fundamental transformation of MakerDAO that improves growth, resilience and accessibility, with the aim of scaling the Dai supply to 100 billion and beyond. This post provides the latest updates of the Endgame features that will be launched in the short- and long term. It is the last Endgame Overview post before Endgame Launch. Endgame will deliver the best and easiest place to save up money and get interesting token rewards in SubDAO to…

To follow the governance vote on whether to keep Sky or recenter the Maker brand, I’m preparing a proposal that clarifies tokenomics and other key questions. Deflationary Tokenomics This proposal would change the core token (Regardless of whether the outcome is MKR or SKY) to strictly deflationary tokenomics. No more token emissions would ever be able to occur in normal conditions, and the total supply would only be able to go down over time as the burn engine permanently removes tokens from ci…

If Sky is to rebuild credibility with long-term investors, it needs a clear and transparent issuance discipline. The current token supply should not be treated as an incidental byproduct of protocol evolution, but as a deliberate policy variable — one that signals how value will be shared between the system and its holders.

A straightforward corrective path would be to acknowledge and gradually reverse the effective over-issuance that occurred during the transition period. The reference should not be the arbitrary 24 billion target, but rather the counterfactual supply that would exist had the original MKR burn been preserved — likely somewhere below 21 billion SKY. A medium-term goal to converge toward that level would send a powerful message of fiscal coherence and long-term alignment.

Equally important is the treatment of buybacks. Buybacks without burns can temporarily support demand, but if the tokens later re-enter circulation to fund expenses, they neutralize their own impact. In traditional finance, this would be equivalent to a company repurchasing shares only to re-issue them months later.

A credible capital-return policy requires a formal burn commitment — a governance rule stating that all buybacked tokens are permanently retired, and that no new issuance will be authorized while burns are active.

This dual framework — a supply reduction roadmap toward the “real” post-burn level and a hard commitment to burn future buybacks — would restore a sense of monetary integrity. It would also give investors a simple and verifiable metric: how many SKY exist, not how much has been spent on buybacks.

In a system that has often prioritized complexity over clarity, that single number could once again become the most powerful signal of trust.

In traditional corporate terms, the surplus buffer is the closest analogue to free cash flow — the portion of profits that can truly be retained, redeployed, or returned to investors. It is the protocol’s most direct indicator of whether it is genuinely profitable, or merely circulating capital within its own ecosystem.

By that measure, Sky’s position is fragile. The surplus buffer is expected to reach –150 million USD, even as the protocol records nominal income from Spark token distributions and other Genesis-related assets. This mirrors a pattern familiar in corporate finance: companies that seem to create enormous “paper value” while their cash reserves steadily shrink.

A useful analogy is a growth-stage tech conglomerate that reports rising valuations in its subsidiaries while its core operations bleed cash. On paper, the balance sheet looks strong; in reality, it is funding expansion through its own reserves, not through organic profitability. Sky’s situation is similar: its books may reflect asset growth via internally issued tokens, but the protocol’s cash position and liquidity cushion are eroding.

This dynamic compromises not only the project’s investability, but also its security.
A healthy surplus buffer functions as the first line of defense in any stress event — a reserve that guarantees solvency and operational continuity. If that capital were abundant, part of it could be distributed to tokenholders, signaling financial strength. The fact that it must instead be channeled into new Stars and incubation efforts indicates that the system is still in a capital-hungry phase, not a self-sustaining one.
In other words, Sky is not yet paying dividends; it is still raising rounds.

Even with temporary boosts from token distributions — such as Spark’s — the structural picture remains clear: the protocol continues to consume capital faster than it produces it. And because much of that “income” is denominated in tokens whose market value is declining, the risk is twofold — financial and systemic. As liquidity drains from the buffer, the protocol’s ability to absorb shocks or fund emergency buybacks diminishes, directly reducing its security margin.

To restore financial discipline and reinforce safety, Sky should redefine and operationalize the surplus buffer as a real liquidity reserve, separating accounting gains from defensive capital.

Three policy steps could achieve this:

1. Segregate Realized vs. Unrealized Income: Only recognize realized, liquid inflows (e.g., stablecoin profits, interest) as part of the surplus buffer. Token allocations from internal agents should remain off-balance until monetized.

2. Establish a Minimum Security Coverage Ratio: Require that a defined percentage of the buffer — e.g., 1% — be held in immediately liquid, non-volatile assets. This creates a tangible financial firewall for the protocol.

3. Suspend Buybacks When Net Buffer Is Negative: Repurchasing tokens while relying on unmonetized holdings undermines both value and resilience. Buybacks should resume only after the buffer is sustainably positive in real cash terms.

These adjustments would turn the surplus buffer into both a profitability benchmark and a security indicator, ensuring that capital allocation reflects not just growth ambitions, but also long-term solvency and investor trust.

The Staking Paradox: When Rewards Dilute the Asset They Aim to Support

One of the most consequential recent design shifts in Sky’s economic model has been the transition from USDS-denominated staking rewards to SKY-denominated rewards — the so-called Sky-to-Sky mechanism.

In theory, this move was meant to strengthen alignment: paying staking rewards in the governance token itself reinforces its centrality and directly ties participation to ownership.
In practice, however, it risks replicating the same reflexivity problem that has long weakened Maker and now Sky — rewarding loyalty by inflating the very asset it seeks to support.

Under the previous framework, the staking system distributed USDS generated from protocol income — effectively sharing real, realized cash-flow with tokenholders. The shift to rewards paid in newly issued SKY reverses that dynamic.

The protocol now uses recently minted governance tokens to simulate yield, rather than distributing earnings derived from actual profits. In other words, the apparent yield does not reflect the protocol’s operational performance, but rather the monetary expansion of its own governance asset.

This transforms what should have been a profit-sharing mechanism into a dilution mechanism, eroding the very scarcity and value foundation that staking is supposed to reinforce.

This turns what should be a dividend mechanism into a monetary expansion tool, diluting existing holders and disconnecting rewards from genuine profitability.

The rationale — to fund larger daily buybacks (up to 300k USD) without cutting nominal yields — may seem efficient, but it introduces a deeper contradiction. Buybacks and rewards denominated in the same asset neutralize each other: the protocol buys SKY to support price, then re-emits SKY to pay stakers. The net result is circular value flow with little net reduction in supply.

Unless those buybacks are permanently burned, the mechanism merely transfers short-term liquidity rather than creating lasting value.

This approach also weakens the signaling power of the token. Instead of representing a claim on the protocol’s productive output — the on-chain equivalent of free cash flow — SKY increasingly reflects an internal subsidy mechanism designed to maintain participation. That may support governance activity, but it discourages investment. Rational investors prefer tokens that capture yield from the protocol’s external success, not from new issuance.

To restore economic reflexivity and align staking with actual performance, Sky could adopt a dual-phase reward structure that distinguishes between monetary and productive yield:

1. Reintroduce USDS-Based Rewards: Distribute staking income exclusively from realized protocol profits — stablecoin interest, fees, or cash inflows — rather than minting SKY.

2. Burn All Buybacked SKY: Establish a governance commitment that any token repurchased in open-market operations is permanently burned, ensuring supply contraction equals value creation.

3. Adopt a Variable Yield Formula: Peg staking APY to protocol profitability — rising when the surplus buffer grows, contracting when it declines. This transforms staking into a transparent profit-sharing tool, not a monetary faucet.

4. Separate Governance Incentives from Financial Rewards: Governance participation can still be rewarded with non-transferable credits or reputational weighting, but should not rely on new token issuance.

A sustainable staking framework must reinforce the store-of-value function of the token, not erode it. By grounding rewards in realized income and hard-coding supply discipline, Sky could replace circular incentives with a genuine cash-flow-based investment case — the foundation for long-term credibility and valuation recovery.

One of the most subtle yet impactful consequences of Sky’s architectural evolution has been the progressive fragmentation of value across a growing number of entities — Stars, Agents, Executives, and their respective tokens.
What began as an effort to modularize risk and encourage specialization has, paradoxically, diluted the economic reflexivity that once tied the protocol’s success to its governance token.

Under Maker’s earlier design, MKR holders captured protocol value directly through a clear loop: stability fees and liquidation income accrued to the system surplus, which then flowed back to MKR via buybacks and burns. The model was simple, elegant, and easy to price.

In the Sky architecture, by contrast, that value chain is now multi-layered. Each new Star or Genesis Agent issues its own token, retains a share of its profits, and distributes another portion via yield or liquidity incentives. In theory, Sky holders benefit indirectly — through treasury holdings or protocol-level fees — but the link is indirect, delayed, and difficult to quantify.
The result is that much of the system’s economic energy escapes into satellite tokens before it can reinforce SKY’s valuation.

From a corporate analogy, Sky increasingly resembles a holding company with majority stakes in high-risk startups. The group may look impressive on paper, with a portfolio of ventures and cross-ownership, but its cash flow to shareholders is minimal. Each subsidiary retains earnings for growth, leaving the parent entity rich in notional value yet poor in distributable returns.

The case of Spark illustrates this perfectly. Despite being one of the ecosystem’s flagship projects — and one that has already generated substantial nominal value — existing investors have not captured any of that upside.
Most of the Spark tokens distributed to the protocol have been sold to fund further investment, rather than shared with current SKY holders.
Moreover, the governance vote against allocating a portion of these tokens to existing investors sent a clear signal: ownership of SKY does not grant access to the project’s new investment opportunities.
This decision, while defensible from an operational perspective, further disincentivizes holding the token, as it strips away one of the few tangible mechanisms through which investors might participate in the ecosystem’s internal growth.

A more balanced approach would have been to split the initial Spark token allocation between the intra-entrepreneurial team and the existing shareholders — those who effectively financed the protocol’s incubation capacity through years of governance, liquidity, and capital exposure.
Such a structure would have recognized that investors and builders are joint contributors to value creation, not separate constituencies.

To restore coherence and investor alignment, Sky’s governance could adopt a structured value-consolidation framework:

1. Define a Clear Profit-Sharing Hierarchy: All Stars and Agents should allocate a fixed percentage of their net profits (e.g., 20–30%) back to the Sky Treasury in stablecoins or liquid assets — not in their own tokens.

2. Standardize Token Flow Mechanisms: Require that all internal distributions to SKY (buybacks or treasury inflows) follow identical rules and occur on predictable schedules, so investors can model aggregate returns.

3. Restrict Cross-Token Dilution: Limit the issuance of new sub-tokens unless they create accretive value for SKY holders; every new agent token should include a transparent value-capture clause linking it back to SKY.

4. Include Shareholders in Genesis Allocations: Future Star launches should reserve a defined share (e.g., 10–20%) of initial token supply for existing SKY holders — distributed either directly or through staking-based claims.

5. Publish Consolidated Financials: Just as a public company produces consolidated statements across subsidiaries, Sky should report unified metrics: total protocol revenue, realized profits, cash reserves, and SKY buybacks.

Re-centralizing value accrual does not mean abandoning modularity — it means ensuring that fragmented growth still compounds into the parent asset.
Only by sharing the upside of its internal ventures can Sky transform from a funding platform into a true on-chain investment ecosystem where holding SKY once again represents a real claim on collective success.

Over time, one of the most striking evolutions in Maker and later Sky has been the transformation of governance from a mechanism of ownership into a bureaucratic layer of management.
While decentralization has achieved impressive operational sophistication — with councils, foundations, working groups, and star-level entities — it has come at the cost of economic alignment.

Governance in its current form resembles that of a technocratic consortium more than that of a capital-driven organization. The discourse revolves around parameters, budgets, and operational mandates, rather than around returns on capital, value per token, or profitability metrics.
In traditional corporate governance, shareholders elect directors to represent their economic interest; in Sky, governance participants increasingly act as operators and contractors, not as owners.

This shift has subtle but far-reaching consequences.
First, it breaks the feedback loop between governance and valuation. If voting power no longer correlates with financial outcomes, holding SKY becomes a form of civic participation rather than an investment.
Second, it blurs accountability: decisions about issuance, spending, or strategic priorities can be justified as “ecosystem growth” without clear benchmarks for capital efficiency.
Finally, it entrenches a managerial culture that prioritizes funding new initiatives over generating distributable profits — a pattern visible in the perpetual expansion of grants, agent funding, and operational budgets, even as the surplus buffer turns negative.

Beyond these structural issues, the lack of strategic guidance compounds the problem.
Sky operates without explicit financial targets, growth benchmarks, or forward-looking statements about expected performance. There is no formal guidance on revenue growth, capital deployment, or ROI across the ecosystem’s ventures.
This absence of clear objectives makes it nearly impossible for investors — or even internal participants — to assess whether the protocol’s strategies are actually working.

In traditional markets, even high-growth companies provide earnings guidance or long-term projections to help investors form expectations and valuations. In Sky, the vacuum of guidance has turned governance into an inward-facing process. For years, discussions have focused on technical and structural evolution rather than on measurable outcomes. The result is a system that may be building extraordinary infrastructure, but without a shared understanding of how, when, or how much value this infrastructure is meant to generate.

In valuation terms, the absence of guidance effectively removes the ability to build a forward-looking model — the foundation of any investment case. Without targets, investors cannot measure progress; without measurement, accountability becomes impossible.

The result is a protocol that is exceptionally well governed in procedural terms, yet opaque in its strategic direction and unmeasurable in its performance.

To restore the link between governance, ownership, and valuation, Sky could adopt a value-oriented governance model grounded in financial transparency and forward-looking discipline.

1. Define Governance KPIs in Financial Terms: Replace abstract metrics like “ecosystem growth” with measurable financial indicators — net protocol profit, return on treasury capital, token supply contraction, and security buffer coverage.

2. Introduce Annual Guidance and Performance Reports: Each year, governance should publish a set of financial and operational targets — including expected protocol revenues, funding allocations, and profitability milestones — followed by periodic evaluations of actual performance.

3. Align Voting Power with Long-Term Stake: Introduce vesting-weighted voting or loyalty multipliers so that governance influence accrues to those with durable exposure, not transient speculation.

4. Create a Governance Dividend Mechanism: Dedicate a fixed share of realized profits (e.g., 10–15%) to direct distributions for active, long-term voters — turning governance into a productive act of ownership.

5. Require Economic Justification for Treasury Spending: Every major allocation (e.g., to Stars, grants, or liquidity programs) should include a projected ROI, a payback horizon, and a follow-up assessment of execution.

Providing guidance is not about centralizing control — it is about creating a shared frame of expectations between the protocol and its investors.
Without it, there is no baseline for analysis, no accountability, and no valuation anchor.
By institutionalizing guidance and measurable outcomes, Sky could evolve from an internally self-referential system into a financially transparent, externally investable network — one that balances decentralization with strategic clarity.

After years of evolution, experimentation, and internal reinvention, Sky finds itself at a defining crossroads.
Its architecture is more sophisticated than ever — a complex, modular ecosystem with vast potential to become the backbone of a decentralized financial infrastructure. Yet the token that represents its core, SKY, has not reflected that success.
The market discount is real, but it is not unjustified. It is the rational outcome of a design that has, for too long, prioritized structure over signal, process over profit, and governance over ownership.

But this does not mean the situation is irreversible.
The same design flexibility that diluted SKY’s economic reflexivity also gives the protocol the tools to restore it.
If the measures outlined in this analysis — disciplined issuance, a transparent surplus buffer, real-yield staking, value consolidation across Stars, and guidance-driven governance — are implemented, Sky could transform its narrative from undervalued by design to revalued by discipline.

The pieces are all there:

• A functioning on-chain economy with strong technological fundamentals.

• An ecosystem of Stars capable of generating real revenues.

• A treasury large enough to sustain strategic investment.
  What is missing is financial coherence — a clear articulation of how these strengths translate into long-term value per token.

Reintroducing a credible issuance policy would reestablish scarcity and restore trust.
Anchoring the surplus buffer in real cash flow would prove profitability.
Grounding staking in genuine income and enforcing burn commitments would make every buyback count.
Sharing the upside of new ventures with existing holders would turn Sky into a true investment ecosystem.
And providing clear, periodic guidance would give investors the visibility they need to believe again.

The undervaluation thesis, in that sense, is not wrong — it is merely premature.
The market is waiting for evidence that Sky can bridge the gap between innovation and value capture, between vision and return.
That bridge will not be built by marketing or speculation, but by monetary integrity, capital discipline, and transparent execution.

If Sky embraces these principles, it could become not only the most advanced governance experiment in DeFi, but also a benchmark for sustainable value creation.
In doing so, it would finally justify the faith of those who have supported it through years of transformation — proving that the token’s undervaluation was never structural, only temporary.