Sky token rises 10% following governance vote that shifts market dynamics positively.

The protocol has repurchased approximately 1.83 billion SKY tokens using USDS, while a governance proposal dated March 2 has reduced staking emissions and enhanced the credit infrastructure surrounding its USDS stablecoin.

What to know:

• Sky’s SKY token experienced an increase of nearly 10 percent following a governance proposal that reduced staking emissions, enhanced USDS credit infrastructure, and aligned with an ongoing token buyback initiative.
• The revised plan decreases SKY staking rewards to approximately 838.18 million tokens over a period of 180 days, while buybacks financed by USDS have already utilized around $114.5 million to withdraw approximately 1.83 billion tokens from circulation.
• With roughly 67 percent of SKY currently staked and new “Launch Agents” introduced to expand USDS credit markets, Sky’s modifications are indicative of a wider trend in DeFi toward lower emissions and revenue-driven token buybacks to mitigate dilution.

SKY, the native token of the DeFi platform formerly known as Maker, rose by nearly 10% after the protocol implemented a governance proposal that decelerated the issuance of new tokens via staking rewards, broadened its lending framework related to the USDS stablecoin, and continued a significant buyback scheme that is withdrawing tokens from the market.

The governance proposal, which received approval on February 27 and was enacted on March 2, introduced multiple adjustments throughout the Sky Protocol, including modifications to staking rewards and the integration of new credit infrastructure aimed at enhancing the reach of its USDS stablecoin ecosystem.

A key change that attracted attention involved staking rewards – the rate at which new coins are distributed as a return for locking existing holdings within the protocol.

Slower supply growth

The proposal “normalized” the so-called SKY staking emissions by establishing the distribution at approximately 838.18 million tokens over the next 180 days, which signifies a decrease of around 161.82 million tokens compared to the former schedule. Reduced emissions can alleviate dilution pressure, a significant factor that traders frequently monitor when assessing governance tokens.

Concurrently, the protocol has been consistently repurchasing its token through an automated buyback scheme financed by USDS. As per Sky’s dashboard, the system has expended approximately $114.5 million in repurchasing about 1.83 billion SKY tokens thus far.

The acquisitions occur in small transactions throughout the day, typically around $10,000 per trade, creating a consistent bid in the market. Overall, the program is currently withdrawing about 3.6 million SKY tokens from circulation on a daily basis.

In conjunction with the adjustments to emissions, the buybacks have tightened the effective supply of the token. Data from the protocol indicates that approximately 67% of SKY is presently staked, leaving a smaller portion actively available for trading in the market.

The governance proposal also sanctioned the creation of new infrastructure to broaden credit markets related to the protocol. Two new “Launch Agents” were onboarded to facilitate the deployment of credit and manage liquidity infrastructure associated with the USDS stablecoin system.

Industry trend

In the broader cryptocurrency landscape, an increasing number of protocols are transitioning toward token models centered around buybacks and reduced emissions, moving away from the inflation-heavy incentive structures that characterized early DeFi.

Historically, many protocols distributed substantial quantities of newly minted tokens to lure liquidity providers, traders, and governance participants. While these incentives aided in network initialization, they also resulted in ongoing selling pressure as recipients frequently sold their rewards into the market.

Recently, however, protocols have begun adopting an opposing approach. Instead of issuing additional tokens, some protocols are utilizing revenue to repurchase tokens on the open market or completely reduce emissions.

Hyperliquid serves as a recent example. The decentralized exchange allocates a fraction of trading fees to buy and burn its HYPE token. When trading activity surged last week, the protocol generated over $13 million in weekly fees, enabling approximately $9 million worth of tokens to be burned within a week.

Other projects are following suit with similar strategies. Solana-based Jupiter voted in February to halt net new emissions for its JUP token in 2026, thereby preventing any additional supply from entering circulation. Additionally, derivatives protocol dYdX approved a strategy designating 75% of its protocol revenue for token buybacks.

This trend signifies a broader initiative to more closely tie token demand to protocol activity while limiting dilution for current holders.