From cointelegraph by Josh O'Sullivan

Rune Christensen, the co-founder of Sky (formerly MakerDAO), said he is preparing a proposal for “strictly deflationary tokenomics” to halt token emissions and decrease total supply.

Christensen aims to prevent token emissions from occurring “in normal conditions” regardless of whether the core token stays as Maker MKR$1,143.28 or becomes SKY in line with the new brand.

The new token structure would ensure that the chosen token is supported by long-term supply reduction and a burn mechanism, aligning with MakerDAO’s original tokenomics model.

This new proposal would extend this original model by reinforcing the supply reduction concept and continuing its goal toward increased stability and decreased inflation.

Related: Sky: Community to consider another rebrand, back to Maker

Strictly deflationary tokenomics

Christensen’s proposal mainly aims to implement a “burn-only” deflationary model, steadily reducing the core token supply through a systematic burn mechanism.

Under normal conditions, no new tokens would be issued, allowing the token supply to fall with one exception: Additional tokens could be issued solely in cases of emergency.

The Sky co-founder constitutes this “emergency” as something that could place stablecoins USDS or Dai DAI$1.00 at risk of insolvency, such as a collateral shortfall where there were insufficient assets to cover debts.

Related: Sky rethinking plan to offboard WBTC after discussion with BitGo CEO

Value through rewards

In tandem with the deflationary model proposal, Christensen also includes a reward structure to incentivize participation and improve token value.

Whether the core token remains MKR or switches to SKY, the rewards system would allow holders to earn “Star Token Rewards, such as Spark SPK, through Activation.”

The co-founder added that “committed governance participants using the Seal Engine” would also be able to receive “more valuable rewards of both Star Tokens and USDS Rewards.”

Related: DeFi lending protocol Sky to drop wrapped Bitcoin after governance vote

Upcoming governance vote

Christensen’s proposal precedes the upcoming governance vote set to take place between Nov. 11 and 14, in which stakeholders will decide whether MKR or SKY serve as the core token.

The vote comes after the community considered doubling back on its decision and reverting to its original Maker name after negative feedback and confusion over its August rebrand to Sky.

In his Nov. 4 X post, Christensen said this latest proposal would allow the ecosystem to “move forward and focus on growing the fundamentals” through renewed clarity for the protocol’s future direction.

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