MakerDAO Community Leader Proposes New Governance Token, stkMKR

MakerDAO has announced that its MakerDAO community has proposed a new governance token (stkMKR). The proposal seeks to allow the coin to be the bonding asset for MKR pooled in governance proposals.

MakerDAO May Get a New Governance Token Soon

MakerDAO’s community leader Monet-supply proposed stkMKR on Monday to replace MKR as the governance token. The proposal seeks to introduce stkMKR as the new governance token for the Maker that is staked in governance proposals.

The announcement was made through a tweet by MakerDAO, attracting the attention of many enthusiasts hours after the reveal. Most of the comments on the tweet were supportive, considering the technical ingenuity of the proposal. 

However, the road for implementing the proposal is still long as it needs to be submitted as a Maker Improvement Proposal for a formal vote by MKR holders. The process usually takes two weeks to complete.

The new proposal seeks to address several issues in the current tokenomics model of the ecosystem that involves a ‘buyback and burn’ mechanism. Monet-supply suggests that the current system has several drawbacks as the buyback and burn system returns all capital to the MKR holders. Monet brands such a mechanism as lack of targeted incentives.

How Will stkMKR Work?

Monet-supply explained that there is also a ‘weak crypto narrative’ that could be reshaped to make the protocol better. The current protocol also has a limited deterrence against governance attacks and voting manipulation, which could be dangerous.

StkMKR token will replace MKR as the core token of the MakerDAO if the vote goes in favor of the proposal. The coin will also be a staking token issued to investors who choose to stake their MKR in the governance pools. It will also try to preserve key benefits of the current system like gas and tax efficiency.

According to the proposal, stkMKR will still be backed by increasing MKR over time. The backing increase will happen through automatic compounding like in xSUSHI. The withdrawal process will also require waiting for a preset unbounding period meant to improve the resilience of the protocol, similar to Cosmos and stkAAVE.

Users will be allowed to stake their MKR in the governance pools to receive stkMKR, giving them voting power and rights to redeem shares of the underlying MKR token. The new governance token is held within the voting contracts and allows free delegation/redelegation across the contracts without unbounded periods or delays.

A portion of the MKR from the surplus auction will go to stkMKR holders rather than dead wallets. The process could also be topped up manually by new minting or governance from the treasury.

A user must initiate a withdrawal and then wait for a fixed unbounding period to withdraw funds successfully. During the ‘delay,’ stkMKR will be burnt, and a corresponding amount of MKR will be transferred to escrow, stripping it off voting rights and yield benefits. After the unbounding period, the user can claim the funds from escrow.