What are the main risks of holding Maker (MKR)?

MakerDAO created DAI, and MKR once governed that system. After the 2024 rebrand to Sky, SKY became the governance token, and MKR became a legacy token that can be upgraded to SKY.

What does MKR expose you to?

MKR can lose value when the protocol takes on bad debt. That happens when collateral is worth less than the loan and a liquidation auction does not raise enough. Under the original design, the protocol minted new MKR and sold it to cover the gap, diluting holders. After Sky, SKY is the token that can be diluted, so MKR holders who upgrade take that risk.

How can governance and code fail?

Governance and code create separate ways to lose value. SKY holders vote on protocol changes, and MKR holders can upgrade to SKY to take part.

• Governance attacks: enough voting power can change rules and redirect value.
• Smart contract bugs: code errors can lock or drain funds.
• Oracle failures: wrong prices can trigger bad liquidations.
• Bridge risks: bridged MKR can be lost if a bridge is hacked.

What regulatory risks does MKR face?

US regulators may treat MKR or other DeFi governance tokens as securities. The SEC uses the Howey test, which asks whether buyers expect profits from others' efforts. A security label can bring registration rules and limits on US trading.

What changed with the Sky upgrade?

In 2024 MakerDAO rebranded to Sky and introduced USDS. MKR holders could upgrade to SKY, and SKY became the main governance token. MKR remains a legacy token, while SKY carries governance and dilution risk.

Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.