SKY, the native token of DeFi platform Sky (formerly Maker), is up nearly 10% after the protocol implemented a governance proposal that slowed the creation of new tokens through staking rewards, expanded the lending system around the USDS stablecoin, and continued a massive buyback program that took tokens off the market.
The governance proposal, passed on February 27 and implemented on March 2, introduced several changes at Sky Protocol, including adjustments to staking rewards and the addition of new credit infrastructure designed to expand the scope of its USDS stablecoin ecosystem.
One of the most talked about changes involves staking rewards – the rate at which new coins are issued in return for locking existing assets in the protocol.
Supply growth slows
The proposal would so-called “normalize” SKY staking emissions, setting the number of allocations over the next 180 days at approximately 838.18 million tokens, approximately 161.82 million tokens less than the previous plan. Lower emissions reduce dilution pressure, a factor that traders often pay close attention to when evaluating governance tokens.
Meanwhile, the protocol has been steadily buying back its own tokens through an automated buyback program funded by USDS. According to Sky’s dashboard, the system has spent approximately $114.5 million to repurchase approximately 1.83 billion SKY tokens so far.
Purchases are made in small transactions throughout the day, typically around $10,000 per transaction, creating a stable bid in the market. Currently, the program removes a total of approximately 3.6 million SKY tokens from circulation every day.
Combined with emission adjustments, buybacks tighten the effective supply of tokens. Data from the protocol indicates that approximately 67% of SKY is currently staked, with a small remaining portion actively trading in the market.
The governance proposals also approved new infrastructure to expand credit markets around the protocol. Two new “launch agents” have joined to help deploy credit and manage the liquidity infrastructure connected to the USDS stablecoin system.
Industry trends
Across the cryptocurrency market, more and more protocols are moving toward token models built around buybacks and lower emissions, replacing the heavily inflationary 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 these incentives help bootstrap the network, they also create constant sales pressure as recipients often sell their rewards into the marketplace.
Recently, the agreement has begun to move in the opposite direction. Rather than issuing more tokens, some use protocol revenue to buy back tokens on the open market or reduce emissions altogether.
Superliquids provide a recent example. The decentralized exchange allocates a portion of transaction fees to the purchase and destruction of its HYPE tokens. When trading activity surged last week, the protocol was generating more than $13 million in weekly fees, allowing around $9 million worth of tokens to be burned within seven days.
Other projects are taking a similar approach. Solana-based Jupiter voted in February to eliminate net new emissions from its JUP token in 2026, preventing additional supply from entering circulation. Meanwhile, derivatives protocol dYdX approved a plan to use 75% of protocol revenue for token buybacks.
The shift reflects a broader effort to tie token demand more directly to protocol activity while limiting dilution for existing holders.