Opinion: Why I believe MakerDAO's MKR will outperform most assets?

Author: Taiki Maeda

Translation: TechFlow

In my MKR/SKY report from a few months ago, I argued that the resumption of buybacks would make it outperform most crypto assets on a risk-adjusted basis. Since the buyback was announced on February 20:

• MKR has gained 46% against BTC,

• MKR has gained 70% against ETH,

• MKR is one of the few cryptocurrencies with a year-to-date (YTD) price increase: +24%.

In this update, I will discuss three reasons why I believe this trend will continue:

1. Launch of SKY staking mechanism

2. Mandatory SKY token migration (>10% of supply will be burned)

3. SPK token mining program

Introducing the SKY Staking Mechanism

Currently, MKR/SKY is a token that uses all protocol revenues to repurchase its own tokens. At the current buyback pace, the protocol repurchases approximately $15 million per month ($500,000 daily), equivalent to about 1% of circulating supply each month—the highest rate among all crypto projects.

On April 30, Rune posted a proposal on the forum to launch the SKY staking mechanism. Under the proposal, 50% of protocol revenue will be distributed to SKY stakers in USDS. This means approximately $250,000 per day will go toward buybacks and $250,000 will be allocated to stakers.

Assuming 33% of the SKY supply is staked, stakers could expect a 7-8% staking yield.

Mandatory SKY Token Migration

In the same update, a mandatory migration from MKR to SKY was also mentioned:

Since MKR is one of the earliest ERC20 tokens (launched in 2017), there are inevitably some permanently lost tokens due to lost private keys, missing wallets, or holder deaths. Through on-chain data analysis, I identified several "dormant MKR tokens" that will inevitably be removed from circulation.

Based on reasonable assumptions—for example, “if 23,349 MKR tokens have had no movement over the past 4–5 years, I can assume around 90% of them are permanently lost and thus will be burned”—I estimate approximately 100,000 MKR will be burned through migration (about 11.4% of circulating supply). Drawing parallels from other lost token cases (such as Aragon DAO), I consider this a conservative estimate.

For instance, in 2023, Aragon DAO’s token ($ANT) traded below treasury value. “Treasury raiders,” or RFVooors, bought tokens below net asset value (NAV) and demanded treasury redemption for profit. The action succeeded, leading to an ANT token migration process to redeem treasury value. During this process, about 27% of tokens were not migrated, indicating they were permanently lost.

Therefore, I expect 10–20% of MKR to be burned over the coming months or years, providing strong support for the token price. Additionally, this mandatory migration could prompt more centralized exchanges (CEXs) to list SKY, bringing further positive momentum.

SPK Token Launch

Spark is a project combining lending markets with on-chain asset management. In Q1 2023, it generated $40 million in revenue despite minimal incentives. It has been able to borrow stablecoins at subsidized rates for SKY, enabling capital deployment on-chain.

SPK will be a “fair launch/mining” token, accessible only by staking USDS or SKY (refer to related documentation for the full economic model). In the first two years after token launch, 50% of $SPK will be allocated as incentives. Assuming a fully diluted valuation (FDV) of $500 million, $250 million worth of SPK will be distributed to SKY/USDS stakers. This not only provides staking yield for native tokens but also promotes USDS growth, which in turn will drive future buybacks.

Additionally, other subDAOs or “Star” projects (e.g., Solana Star, RWA Star) are set to launch soon. The introduction of these new initiatives will further boost the buyback program.

Stablecoin Bill

The “Stablecoin Bill” (GENIUS ACT) is expected to be signed by Trump in July or August. Although the bill primarily targets centralized stablecoin issuers (and thus has limited impact on decentralized ones), this policy narrative could provide positive market momentum for MKR/SKY. Industry experts predict the bill could pass in July or August.

Summary

Stablecoins are the future and among the most profitable ventures in crypto.