Rune Christensen Pushes Through Sky Changes to Prevent “Irreversible Catastrophe”

In the wake of what he described as a failed governance attack, Rune Christensen announced a series of changes to Sky, formerly known as MakerDAO.

On Feb. 18, Christensen, co-founder and CEO of Sky, pushed through an emergency proposal aimed at thwarting what he called on X a “laughable” attack “aimed at taking over Sky.”

He said there was evidence the attackers planned to “liquidate large MKR positions as their ticket to seize control and then use the surplus buffer to ‘finance the takeover.’”

Christensen told The Defiant via Telegram that he didn’t “think the attack was likely to have succeeded in the first place, but if it actually happened it would be an irreversible catastrophe.”

As part of the August rebranding of MakerDAO, the DAI stablecoin became USDS. A new governance token, SKY, was added and the existing MKR tokens will be migrated over. Sky has $5.51 billion total value locked, according to DeFiLlama.

Protecting against an attack

To prevent such an attack, Sky’s governance facilitators pushed through the following changes:

• Maximum Debt Ceiling increases from 20 million USDS to 45 million USDS
• Target Available Debt increases from 5 million USDS to 45 million USDS
• Ceiling Increase Cooldown drops from 16 hours to 30 minutes
• Stability Fee increases from 12% to 20%
• Liquidation Ratio decreases from 200% to 125%
• Exit Fee decreases from 5% to 0%

The changes, Christensen said, mean “that SKY holders that vote and borrow against their SKY have a much lower liquidation ratio, so the price of MKR would have to be pushed down all the way to $300 for there to be a risk of someone seizing control of governance.”

MKR is currently at $1,274.

“Obviously anyone should be able to and encouraged to buy MKR and SKY the honest way and then use that to set the direction of the project,” he said. “The problem is if control is seized by suddenly and rapidly liquidating existing token holders or borrowing lots of tokens.”

That, Christensen added, “is why it was important to make the changes so that the likelihood of such tactics succeeding are much lower.”

The Sky governance facilitators “thought the risk was serious enough to make sure it was defended against, out of an abundance of caution,” he said.

Crossed a line

Sam MacPherson, CEO of smart contract development firm Phoenix Labs, went on X to offer what he said was “some color” on the situation, which he blamed on the Sky community member who uses the pseudonym ImperiumPaper on X.

Accusing them of having “crossed a line” from harmlessly politicking to become the “anti-Sky voice,” MacPherson said ImperiumPaper was involved in a plan to manipulate oracles “to liquidate Rune and seize control quickly in the confusion.”

Saying he suspects the move “borders into fraud territory,” MacPherson said, “the reason this is an attack and not just someone with more voting power making an alternative decision is due to the price manipulation tactics to liquidate the larger voter.”

MacPherson alleged there was evidence ImperiumPaper planned to “loot the treasury” which acts as insurance for the protocol to fund the attack.

ImperiumPaper said via Telegram that he did not want to engage with the comments of MacPherson “or anyone else without firsthand knowledge.”

Another perspective

ImperiumPaper had a different perspective in an X thread.

“I am not personally aware of any such attack,” he said, adding that there are “​​groups of MKR holders interested in reforms to restore Maker to profitability and growth after a period of growing dissatisfaction.”

There’s certainly cause for dissatisfaction, as at $1,196 the MKR token is down 68% from its April 2024 high of $3,755.

“​​The emergency proposal to increase the amount, and lower the collateralization requirement of, endogenous collateral was put forward ‘to protect the project from potential governance attacks,’" he said. “It's unclear what attack vector is addressed by allowing for more borrowing against MKR.”

He also noted that his own Discord account and that of GFX Labs, with which he is affiliated, were banned for at least the voting period.

As for his activities, ImperiumPaper noted that in recent weeks GFX labs has submitted five governance proposals he described as pro-tokenholder, pro-growth, good governance reforms intended to increase MKR’s value.

“How increasing the available DAI [USDS] to borrow, and at unsafe LTV [loan-to-value] far beyond those on Morpho & Aave, is an emergency is not clear to me,” he said. “Attempting to silence critics during a sudden, unannounced vote on such a topic is even more mysterious.”

Saying the emergency proposal delegitimized Sky’s governance process, PaperImperium said “there is now little incentive for MKR holders to follow the governance process, if that process will not be honored and respected by the very persons who wrote the rules.”

“What we DON’T want is for competing groups to do their own emergency proposals, w/o discussion, via raw voting power in the protocol,” he added. “That would be the end of governance.”

But not necessarily the end of this fight.

In response to a comment on his thread that “raiders have been buying,” ImperiumPaper said, “No, activists have been buying. Pretty standard value investing kind of agenda.”