MakerDAO community proposes for replacing MKR governance token with stkMKR

On Monday, decentralized stablecoin platform and Tron stablecoin competitor, MakerDAO forum displayed a proposal by community leader monet-supply that highlights an alternative token economic mechanism.

The protocol could replace its existing governance token, MKR, with a new token called stkMKR if the idea wins a full governance vote.

🤝 @hasufl introduced himself as a Maker Governance Delegate on the ninth episode of Meet Your Delegate.

Recording on Youtube is here:https://t.co/yEshJFzv1X

— Maker (@MakerDAO) March 14, 2022

Within a few hours of its posting, the proposal received a slew of replies, the majority of which were positive and focused on the technical aspects of the solution. The proposal and debate stage must be presented as a Maker Improvement Proposal (MIP) to MKR holders for a formal vote, which typically takes two weeks.

The existing tokenomics model, which runs on a “buyback and burn” mechanism, has some flaws and inconsistencies, which the staking solution overcomes. Monet-supply claims that the existing mechanism has various flaws, including a lack of specialized incentives because buyback and burn return all cash to MKR holders.

According to monet-supply, there is also a “weak crypto narrative,” and MKR issuance might be used to improve the system. The existing system also has limited deterrence against attacks on administration or election fraud.

stkMKR would be the governing token

The proposed solution is a new stkMKR coin that would take the place of MKR as MakerDAO’s main governing token. It would function as a staking or bonding token for MKR holders who had invested the money for governance purposes.

“stkMKR will be non-transferable and represents MKR staked in governance. Staked token holders will receive a share of MKR tokens purchased through surplus auctions, so stkMKR will be backed by an increasing amount of MKR over time.”

The rewards process has been modified, according to Monet-supply, and there will be more opportunities to stake utilizing the fresh strategy.

Users can deposit crypto assets as collateral to create the decentralized stablecoin Dai using MakerDAO (DAI). This can then be applied to other Decentralized Finance (DeFi) protocols or liquidity pools, for example. When the “loan” is repaid and the collateral is removed, the DAI is burnt.