Proposal from the MakerDAO community to replace MKR as the governance token

    The proposal introduces a new stkMKR token which will act as a bonding asset for MKR staked in governance proposals

    The community behind decentralized stablecoin platform MakerDAO is mulling over a major tokenomics shift that could replace its governance token, Maker (MKR).

    A proposal 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.

    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.

    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.

    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.

    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.

    “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.”

    MKR prices were trading flat on the day at $1,766 at the time of writing, according to CoinGecko. However, the token has dropped 11% over the past fortnight and is currently down 72% from its May 2021 all-time high of $6,292.

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