Maker, now Sky, faces backlash over USDS stablecoin’s freeze function

• Sky’s USDS stablecoin has a freeze function, raising decentralization concerns.
• Rune Christensen, Sky’s co-founder, says the freeze function won’t be active at launch.
• Sky’s website is blocking VPNs further adding to the criticism following the rebrand.

A day after the decentralized finance (DeFi) project Maker rebranded to Sky, the new protocol is under intense scrutiny over a freeze function in its upgraded stablecoin, USDS.

Critics argue that the new stablecoin’s “freeze function,” which allows the issuer to freeze transactions, could undermine the project’s commitment to decentralization. The backlash has been significant, especially given Sky’s recent rebranding and controversial website changes.

Co-founder Rune Christensen has responded to the concerns, aiming to clarify the project’s stance.

Concerns over the decentralization of Maker, now Sky

Some community members believe the USDS “freeze function” conflicts with the core principles of decentralization.

An X user expressed concern that such a feature could fundamentally “defeat the purpose of the project.”

The freeze function, which could potentially allow transactions to be halted under certain conditions, has raised questions about how well it aligns with decentralized ideals.

Co-founder of Sky addresses the freeze function concerns

However, Rune Christensen, co-founder of Sky, has addressed these concerns in a recent X post, clarifying that the freeze function will not be active at the launch of USDS. Instead, the stablecoin will initially include an upgrade capability that may allow future governance decisions to determine whether and how to implement this feature.

Christensen emphasized that any such decision would be carefully considered, weighing risk factors to maintain the system’s integrity.

Actually there will be no freeze function at launch, there will just be an upgrade ability. So later governance can decide how to implement something like a freeze function based on considering all data and find something that protects against as many risk factors as possible

— Rune (@RuneKek) August 27, 2024

Christensen further explained that if activated, the freeze function would adhere to legal frameworks in jurisdictions where Sky operates. This approach aims to ensure a higher level of legal certainty for real-world asset (RWA) collateral backing USDS.

Adam Cochran from Cinneamhain Ventures supports this perspective, suggesting that a freeze function is necessary for securing backing from US Treasury securities and integrating with traditional finance systems.

The reality is, if you want T-bill yield backing, even by secondary treasury deals, you’re going to have a freeze function, and a VPN jurisdiction blocker.

A trade off this industry needs to decide on, because you can’t reap the benefits of the US tradfi system without its rule… https://t.co/oeLWJmmuAZ

— Adam Cochran (adamscochran.eth) (@adamscochran) August 27, 2024

Sky website blocking VPN access

Besides the “freeze function,” the rebranding of Maker to Sky, along with the transformation of its Dai stablecoin to USDS, has also been met with criticism due to the project’s website blocking VPN access.

Despite these issues, Christensen has assured users that the original Dai stablecoin remains unchanged and usable, with USDS incorporating the freeze function as part of Sky’s “Endgame” roadmap.