Sky's Midnight Vote Doubles MKR Borrowing Limits Amid Governance Clash

Sky, the protocol formerly known as MakerDAO, pushed through an emergency governance proposal that dropped collateral requirements from 200% to 125% and doubled USDS borrowing limits against MKR overnight — a move its backers frame as a defense against a governance attack, and its critics call a consolidation of power.

Rather than following the protocol's usual month-long review cycle for governance changes, the proposal was passed within hours, and accounts belonging to vocal critics were subsequently banned from Sky's Discord and governance forum. The proposal also removed exit fees.

The dispute traces back to GFX Labs, which had spent weeks pursuing reform through standard channels. Its proposals, submitted through normal process with the standard one-month review period, called for transparency around an $80 million budget plus a 15,000 MKR allocation, fairer treatment of DAI holders in savings rates, an end to forced contributor anonymity, redirection of marketing funds toward growing markets, and a 25% SPK allocation for MKR holders. These followed a year of underwhelming results, a rebrand widely viewed as unsuccessful, and mounting frustration within the community. None of the proposals were flagged as posing a security risk, yet the accounts behind them were subsequently banned once the emergency vote proceeded.

Founder Rune Christensen and his supporters characterize the episode as resistance to a hostile takeover, alleging that GFX Labs affiliate Imperium Paper was coordinating with Nexo — described by defenders as an "extremely sketchy exchange" — to manipulate oracles, trigger liquidations, and seize control of the protocol. Screenshots circulated by Hexonaut are cited as evidence of this plan, warning of potential treasury looting and price manipulation; critics, including ivangbi and Mihai, describe the same screenshots as ordinary activist-investor strategy discussion rather than proof of an attack. A trader commenting on the situation, Samuel McCulloch, suggested both sides "want the best for Maker" but differ on policy and implementation, and noted that Discord and forum access for critics was revoked during the dispute.

Analysis from Three Sigma and Samuel McCulloch points to a structural detail underlying the emergency changes: by raising loan-to-value ratios for MKR borrowers — a group that reportedly includes Rune himself — the new parameters made it possible to move loans from external platforms like Aave and Morpho onto Maker directly. Unlike MKR held on those external platforms, MKR borrowed within Maker retains its governance voting rights, meaning the shift preserved voting power on debt that would otherwise have been encumbered elsewhere.

Days after the initial vote, Rune advanced a second proposal that reduced the Surplus Buffer from 120 million to 70 million and activated a Smart Burn Engine, after which Sky began buying and burning its own token at a rate of nearly 1 million USDS per day.

Commentator Kazuya characterized the broader pattern as typical of DAO governance generally: large token holders accumulate influence, communities raise objections, opposition organizes, and emergency powers are then invoked to override it — with governance tokens functioning less as voting rights and more as tickets to a process whose real decisions happen elsewhere.

Whether the emergency measures represented necessary protocol defense or an opportunistic power grab remains contested, and no resolution had been reached as the dispute continued to unfold.

Credit: MakerDAO, Imperium Paper, Three Sigma, Sam MacPherson, Samuel McCulloch, Rune, ivangbi, Mihai