SKY, the native token of DeFi platform Sky (formerly Maker), climbed nearly 10% after the protocol executed a governance proposal that slowed how quickly new tokens are created through staking rewards, expanded its lending system around the USDS stablecoin, and kept up a large buyback program that is pulling tokens out of the market.

The governance proposal, which passed Feb. 27 and was executed March 2, introduced several changes across the Sky Protocol, including adjustments to staking rewards and the onboarding of new credit infrastructure designed to expand the reach of its USDS stablecoin ecosystem.

One of the most closely watched changes involved staking rewards – the rate at which new coins are issued as a return for locking up existing holdings in the protocol.

Slower supply growth

The proposal “normalized” the so-called SKY staking emissions by setting the distribution at roughly 838.18 million tokens over the next 180 days, representing a reduction of about 161.82 million tokens compared with the previous schedule. Lower emissions can reduce dilution pressure, a factor traders often watch closely when evaluating governance tokens.

At the same time, the protocol has been steadily repurchasing its own token through an automated buyback program funded with USDS. According to Sky’s dashboard, the system has spent roughly $114.5 Million buying back about 1.83 billion SKY tokens so far.

The purchases occur in small transactions throughout the day, typically around $10,000 per trade, creating a steady bid in the market. In total, the program is currently removing roughly 3.6 million SKY tokens from circulation each day.

Combined with the emissions adjustment, the buybacks have tightened the token's effective supply. Data from the protocol indicates that roughly 67% of SKY is currently staked, leaving a smaller portion actively trading in the market.

The governance proposal also approved new infrastructure to expand credit markets around the protocol. Two new “Launch Agents” were onboarded to help deploy credit and manage liquidity infrastructure connected to the USDS stablecoin system.

Industry trend

Across the crypto market, a growing number of protocols are shifting toward token models built around buybacks and lower emissions, replacing the inflation-heavy 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 those incentives helped bootstrap networks, they also created persistent selling pressure as recipients often sold rewards into the market.

More recently, protocols have begun moving in the opposite direction. Rather than issuing more tokens, some are using protocol revenue to repurchase tokens on the open market or reduce emissions altogether.

Hyperliquid offers a recent example. The decentralized exchange allocates a portion of trading fees to buy and burn its HYPE token. When trading activity surged last week, the protocol generated more than $13 Million in weekly fees, allowing roughly $9 Million worth of tokens to be burned over seven days.

Other projects are pursuing similar approaches. Solana-based Jupiter voted in February to eliminate net new emissions for its JUP token in 2026, preventing additional supply from entering circulation. Meanwhile, derivatives protocol dYdX approved a plan allocating 75% of protocol revenue toward token buybacks.

The shift reflects a broader effort to tie token demand more directly to protocol activity while limiting dilution for existing holders.