The evolution of MakerDAO from CDPs to Sky
MakerDAO transitioned from its original Collateralized Debt Position model to the Sky ecosystem to enable decentralized growth through SubDAOs. This restructuring follows historical challenges like the 2020 Black Thursday crisis and aims for expansion via specialized units.
Early foundations and collateral logic
Rune Christensen co-founded MakerDAO in 2015 as a decentralized lending platform on Ethereum. Users deposit crypto assets like ETH into smart contracts called Maker Vaults, formerly known as Collateralized Debt Positions, to mint DAI. DAI maintains a 1:1 peg to the US dollar through overcollateralization. In 2018, Andreessen Horowitz provided a capital boost of $15 million to buy 6% of the MKR in circulation. In 2019, the protocol upgraded to multi-collateral DAI, which allows users to use a basket of assets instead of only ETH. This process involves four steps: creating the CDP and depositing collateral, generating DAI, paying down debt and stability fees, and withdrawing collateral. To retrieve collateral, users must repay the DAI plus a stability fee. The stability fee is payable in MKR or DAI. The protocol holds more than 2.3 million Ethereum, which accounts for approximately 2% of the total Ethereum in circulation. Community members use DAI for diverse purposes, including donations to Unicef and fundraising on the Airbus Heritage platform.
| Feature | Detail |
|---|---|
| Original Token | MKR |
| Stablecoin | DAI |
| Primary Blockchain | Ethereum |
| Rebranded Token | SKY |
| Rebranded Stablecoin | USDS |
The system uses MKR tokens to manage risk and governance. MKR holders vote on collateral types, stability fees, and risk parameters. They also act as buyers of last resort to cover bad debt by minting and selling MKR in debt auctions.
Black Thursday and governance vulnerabilities
The protocol faced its worst crisis on March 12, 2020, when ETH prices fell by over 50% in 24 hours, causing network congestion that drove gas prices to 200 Gwei and prevented oracles from updating. During this period, liquidators submitted bids of 0 DAI for ETH collateral, resulting in $8.32 million in ETH being liquidated for zero DAI. This left the protocol with 5.67 million DAI in bad debt. Because 36% of liquidations on March 12 and 13 were auctions with zero bids, the system struggled. MKR holders voted against compensating the affected Vault owners, which sparked lawsuits.
Governance also faces risks from flash loans. On October 23, the B Protocol team used a flash loan to borrow synthetic Ether, then used that as collateral to borrow $7 million in MKR tokens. They used the borrowed MKR to pass a proposal for white-list access to the MakerDAO price oracle. The B Protocol team was transparent once the foundation became aware of the irregularities. If you think the system is safe from such manipulation, you should re-examine how flash loans impact governance. To prevent such issues, the community uses a 50,000 MKR quorum to trigger an Emergency Shutdown.
The Sky rebrand and Endgame expansion
In 2024, Christensen led a restructuring called Endgame to prevent a single committee from bottlenecking decisions. The transition to Sky marks the most significant reorganization in the project’s history. This plan breaks the monolithic protocol into specialized, semi-independent units called SubDAOs to allow for parallelized growth. The rebrand introduced the SKY governance token and the USDS stablecoin to the market to facilitate the move toward the Endgame State. These SubDAOs allow for specialized focus while feeding liquidity back to the core ecosystem through alignment engineering. The five phases of Endgame include unified branding, subDAOs, leveling the playing field for governance, incentivizing participation, and launching a new blockchain.
The ecosystem includes several distinct entities:
- SakuraDAO focuses on community needs and the Japanese market.
- SparkDAO is a DAI-centric money market protocol.
- Quant handles institutional real-world assets.
- Qual manages private credit and on-chain tokenization.
As of 2026, the Sky ecosystem expanded with Grove, an institutional credit protocol. Grove launched with a $1 billion tokenized-credit strategy using USDS liquidity. This expansion continues the strategy of using regulated credit to generate sustainable revenue. Christensen also planned a rollout on Solana via the Wormhole interoperability protocol to offer USDS and SKY. He favored Solana because of its technical codebase quality and its resilience during the FTX collapse. SakuraDAO recently held a Genesis event in Seoul. Will the most significant reorganization of the project effectively scale the community’s involvement in the new SubDAOs?
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