The community behind decentralized stablecoin platform MakerDAO is mulling over a major tokenomics shift that could replace its governance token, MKR.
On March 14, community leader “monet-supply” made a proposal at the MakerDAO forum outlining an alternative token economic mechanism. As the proposal passes a full governance vote, the protocol may 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 its posting, most of which were positive and related to the technical aspects of the solution. From the proposal and discussion stage, it must be submitted as an MIP (Maker Improvement Proposal) for a formal vote by MKR holders, which usually takes two weeks.
The strike proposal addresses some issues and inefficiencies with the current tokenomics model, which employs a “buy-back and burn” mechanism. Monet-supply suggested that there are several drawbacks to the existing mechanism, including a lack of targeted incentives, as repurchase and incineration returns all capital to MKR holders.
There is also a “weak crypto narrative” according to monet-supply who said MKR issuance could be used to improve the protocol. The current system also has a limited deterrent to governance attacks or vote manipulation.
@MonetSupply presented an idea of an alternative token economic mechanism that could complement the current MKR system for building repurchase value.
stkMKR? Read the whole thread:https://t.co/1hEORZTblue
— Maker (@MakerDAO) March 14, 2022
The proposed solution is a new stkMKR token that would replace MKR as MakerDAO’s core governance token. It would act as a staking or bonding token issued to those who have deposited MKR for governance purposes.
“stkMKR is non-transferable and represents MKR involved in governance. Holders of staked tokens will receive a portion of the MKR tokens purchased through excess auctions, so stkMKR will be supported by an increasing number of MKR over time.
Excess usage mechanism. Source: forum.makerdao.com
Monet-supply said the reward mechanism has improved and there will be more incentives to use the new system.
MakerDAO allows users to deposit crypto assets as collateral to generate the decentralized stablecoin DAI. This can then be used elsewhere, such as other DeFi protocols or liquidity pools. The DAI is burned when the “loan” is repaid and the collateral is withdrawn.
Related: Shift To Full Decentralization Pushes Maker (MKR) Price Above $4K
According to CoinGecko, MKR prices were stable at $1,766 at the time of writing. However, the token has fallen 11% in the past two weeks and is currently down 72% from its all-time high of $6,292 in May 2021.