SKY, the native token of DeFi platform Sky (formerly Maker), rose nearly 10% after the protocol executed a governance proposal that slowed how quickly new tokens are created through staking rewards, expanded its lending system around the USDS stablecoin, and maintained a large buyback program that is removing tokens from the market.
The governance proposal, which was approved on February 27 and executed on March 2, introduced several changes across the Sky Protocol, including adjustments to staking rewards and the addition of new lending infrastructure designed to expand the reach of its USDS stablecoin ecosystem.
One of the most observed changes involved staking rewards: the rate at which new coins are issued as return for locking existing holdings in the protocol.
Slower supply growth
The proposal “normalized” the 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 compared to the previous schedule. Lower emissions can reduce dilution pressure, a factor traders often watch closely when evaluating governance tokens.
At the same time, the protocol has been steadily buying back its own token through an automated USDS-funded buyback program. According to Sky’s dashboard, the system has spent approximately $114.5 million buying back around 1.83 billion SKY tokens so far.
Purchases occur in small transactions throughout the day, typically around $10,000 per trade, creating a constant supply in the market. In total, the program currently withdraws approximately 3.6 million SKY tokens from circulation each day.
Combined with the issuance adjustment, the buybacks have restricted the effective supply of the token. Protocol data indicates that approximately 67% of SKY is currently up for grabs, leaving a smaller portion actively trading in the market.
The governance proposal also approved new infrastructure to expand credit markets around the protocol. Two new “launch agents” have been brought on board to help deploy credit and manage the liquidity infrastructure connected to the USDS stablecoin system.
Industry trend
Across the cryptocurrency market, a growing number of protocols are moving toward token models built around buybacks and lower issuances, replacing the high-inflation incentive systems that dominated early DeFi.
In the past, many protocols distributed large amounts of newly minted tokens to attract liquidity providers, traders, and governance participants. While those incentives helped boost networks, they also created persistent selling pressure as recipients often sold rewards on the marketplace.
More recently, protocols have begun to move in the opposite direction. Instead of issuing more tokens, some are using the protocol’s revenue to buy back tokens on the open market or reduce emissions altogether.
Hyperliquid offers a recent example. The decentralized exchange allocates a portion of trading fees to purchase and burn its HYPE token. As trading activity surged last week, the protocol generated more than $13 million in weekly fees, burning approximately $9 million in tokens over seven days.
Other projects are following 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, derivatives protocol dYdX approved a plan that allocates 75% of the protocol’s revenue to token buybacks.
The change reflects a broader effort to tie token demand more directly to protocol activity while limiting dilution for existing holders.
