SKY, the native token of DeFi platform Sky (formerly Maker), soared nearly 10% after the protocol executed a governance proposal that slowed the speed with which new tokens are created through staking rewards, expanded its lending system around the stablecoin USDS, and maintained a large buyback program that removes tokens from the market.
The governance proposal, adopted on February 27 and executed on March 2, introduced several changes to the Sky protocol, including adjustments to staking rewards and the integration of new credit infrastructure designed to expand the reach of its USDS stablecoin ecosystem.
One of the most closely watched changes involved staking rewards – the rate at which new coins are issued in exchange for locking existing holdings into the protocol.
Slower growth in supply
The proposal “normalized” so-called SKY staking issuances by setting the distribution at approximately 838.18 million tokens over the next 180 days, representing a reduction of approximately 161.82 million tokens from the previous schedule. Lower issuance can reduce dilution pressure, a factor that traders often watch closely when evaluating governance tokens.
At the same time, the protocol regularly buys back its own token through an automated buyback program funded by USDS. According to Sky’s dashboard, the system has spent around $114.5 million to redeem around 1.83 billion SKY tokens so far.
Purchases occur in small transactions throughout the day, typically around $10,000 per transaction, creating a stable supply in the market. In total, the program currently removes approximately 3.6 million SKY tokens from circulation every day.
Combined with the issuance adjustment, the buybacks tightened the effective supply of the token. Protocol data indicates that approximately 67% of SKY is currently staked, leaving a smaller portion actively traded in the market.
The governance proposal also approved new infrastructure to expand credit markets around the protocol. Two new “Launch Agents” have been integrated to help deploy credit and manage the liquidity infrastructure connected to the USDS stablecoin system.
Industry Trend
In the crypto market, a growing number of protocols are moving toward token models built around buybacks and emission reductions, replacing the high-inflation incentive schemes that dominated early DeFi.
In the past, many protocols distributed large quantities of newly minted tokens to attract liquidity providers, traders, and governance participants. While these incentives helped prime the networks, they also created persistent sales pressure, with recipients often selling their rewards on the market.
More recently, protocols have begun to move in the opposite direction. Rather than issuing more tokens, some are using protocol revenue to repurchase tokens on the open market or reduce issuance altogether.
Hyperliquide offers a recent example. The decentralized exchange allocates a portion of trading fees to purchase and burn its HYPE token. When trading activity increased last week, the protocol generated over $13 million in weekly fees, burning approximately $9 million in tokens over seven days.
Other projects are pursuing similar approaches. Solana-based Jupiter voted in February to eliminate net new issuance of its JUP token in 2026, preventing additional supply from entering circulation. Meanwhile, spinoff protocol dYdX approved a plan allocating 75% of the protocol’s revenue to token buybacks.
This change reflects a broader effort to more directly tie demand for tokens to protocol activity while limiting dilution for existing holders.
