Sky (formerly MakerDAO)¶

Introduction¶

Sky is the longest-standing and most influential decentralized stablecoin protocol in the DeFi ecosystem, formerly known as MakerDAO. In August 2024, MakerDAO completed a brand upgrade and was renamed Sky, simultaneously launching a new token system and product line. Sky's core products are the decentralized stablecoin USDS (formerly DAI) and the governance token SKY (formerly MKR), maintaining a 1:1 peg to the US dollar through an over-collateralization mechanism.

MakerDAO was founded by Rune Christensen in 2014 and is one of the earliest DeFi protocols on Ethereum, as well as core infrastructure of DeFi Summer. Sky/MakerDAO is not merely a stablecoin issuer but a decentralized central bank and credit system, where community governance determines key decisions such as collateral types, stability fees, and risk parameters.

As of 2024, the Sky protocol manages over $5 billion in assets, and USDS/DAI is the third-largest stablecoin behind USDT and USDC. Following the rebrand, the protocol further expanded its product line with savings products, tokenized treasuries, and other innovative offerings.

Core Features¶

1. Dual Stablecoin System¶

USDS: New brand stablecoin with improved user experience
DAI: Classic stablecoin, continues to be supported
Both are freely exchangeable at a 1:1 ratio
DAI is gradually transitioning to USDS

2. Over-Collateralization Mechanism¶

Users collateralize crypto assets to mint stablecoins: - Supports major assets such as ETH, WBTC, stETH - Collateral ratio typically 150%-200% - Positions below the liquidation threshold are liquidated - Ensures the stablecoin's solvency

3. Sky Savings Rate (SSR)¶

USDS holders can earn a savings rate: - No lockup required, deposit and withdraw at any time - Rate determined by governance (historically 5-15%) - Attracts users to hold USDS

4. Sky Token Stars¶

Tokenized US Treasury product: - Hold real-world assets on-chain - Earn Treasury yields - Flagship product of the RWA business

5. Multi-Collateral Support¶

Assets with different risk profiles: - Crypto-native assets (ETH, WBTC) - Liquid staking tokens (stETH, rETH) - Real-world assets (RWA) - Stablecoins (USDC, etc.)

6. Decentralized Governance¶

SKY holders determine protocol operations: - Adjust stability fees - Add new collateral types - Allocate protocol revenue - Make major strategic decisions

Core Advantages¶

1. Decentralization¶

No reliance on a single entity or bank account.

2. Transparency¶

All collateral and debt are publicly verifiable on-chain.

3. Flexibility¶

Supports multiple collateral types to accommodate different needs.

4. Scalability¶

Scales through PSM (Peg Stability Module) and RWA.

5. Yield Opportunities¶

Provides risk-free savings yield for USDS holders.

Development History¶

MakerDAO Era (2014-2024)¶

Early Stage (2014-2017) - Rune Christensen founded MakerDAO - Single-collateral DAI (SAI) launched, supporting only ETH - MKR governance token issued

Multi-Collateral DAI (November 2019) - Upgraded to multi-collateral system - Supported ETH, BAT, and other assets - Introduced DSR (DAI Savings Rate)

DeFi Summer (2020) - Became core DeFi infrastructure - Explosive growth in DAI supply - Integrated into hundreds of DeFi protocols

RWA Exploration (2021-2023) - Introduced real-world assets as collateral - Partnered with RWA protocols such as Centrifuge - Invested in US Treasuries and corporate bonds

Black Thursday (March 2020) - ETH crash caused massive liquidations - System debt and auction mechanism issues exposed - Major improvements followed

Endgame Plan (2022-2023) - Rune proposed the Endgame long-term plan - Planned split into multiple SubDAOs - Prepared for brand relaunch

Sky Era (2024-)¶

Brand Upgrade (August 2024) - MakerDAO renamed to Sky - MKR upgradeable to SKY (1 MKR = 24,000 SKY) - DAI upgradeable to USDS (1:1) - Launched new visual identity and product line

Product Expansion - Sky Savings Rate savings product - Sky Token Stars tokenized treasuries - Improved user experience and onboarding

Core Products¶

USDS Stablecoin¶

Decentralized, over-collateralized stablecoin
Maintains 1:1 peg with USD
Usable across various DeFi applications
Compatible with DAI, freely exchangeable

Sky Savings Rate¶

Savings account for USDS
Earns a share of protocol revenue
No lockup period, flexible deposits and withdrawals
Similar to a traditional bank savings account but on-chain

Sky Token Stars¶

Tokenized US Treasury investment product
RWA under a compliance framework
Provides stable USD-denominated yield for users
On-chain transparent real-world asset exposure

Vaults¶

Users open vaults to collateralize assets and mint USDS: - Supports multiple collateral types - Flexible collateral ratios and stability fees - Self-managed debt positions

Economic Model¶

SKY Token¶

Total Supply: Approximately 2.4 billion tokens (1 MKR = 24,000 SKY)
Token Functions:
Governance voting rights
Protocol revenue distribution (potential future)
Last-resort collateral for system debt

Revenue Sources¶

Stability fees: Interest on minting USDS
Liquidation penalties
PSM fees
RWA investment returns

Revenue Distribution¶

Portion allocated to SSR payments
Portion goes to the surplus buffer (system reserves)
May be distributed to SKY holders in the future

Use Cases¶

1. Decentralized Stablecoin¶

Serves as a censorship-resistant alternative to the US dollar.

2. DeFi Collateral¶

USDS/DAI is one of the most widely used stablecoins in DeFi.

3. Savings Account¶

Earn passive income through SSR.

4. Leveraged Investment¶

Collateralize ETH to mint USDS, then buy more ETH (recursive borrowing).

5. Enterprise and DAO Treasury Management¶

Serves as a decentralized USD reserve.

Risks and Challenges¶

1. Collateral Risk¶

Crypto asset price volatility may trigger liquidations.

2. RWA Risk¶

Real-world assets introduce custody and legal risks.

3. Governance Risk¶

Decisions may be influenced by large holders or specific interest groups.

4. Competitive Pressure¶

Centralized stablecoins like USDT and USDC hold dominant market positions.

5. Regulatory Uncertainty¶

RWA and stablecoin businesses face regulatory challenges.

6. Brand Transition¶

The transition from MakerDAO to Sky requires time and user acceptance.

Competitors¶

USDT/USDC: Centralized stablecoins, largest by market cap
Frax Finance: Partially collateralized + algorithmic stablecoin
Liquity: Governance-free decentralized stablecoin (LUSD)
Aave GHO: Aave's native stablecoin
Curve crvUSD: Curve's LLAMA algorithmic stablecoin

Sky/MakerDAO's Advantages¶

Longest-standing reputation in DeFi
Most decentralized stablecoin governance
Mature risk management framework
Rich RWA business experience
Broad DeFi integrations

Best Practices¶

USDS Holders¶

Consider depositing into SSR to earn savings rate
Stay informed about protocol governance decisions
Diversify risk, avoid over-concentration

Vault Users¶

Maintain a healthy collateral ratio (recommended 200%+)
Monitor liquidation prices
Understand the risks of different collateral types
Regularly check stability fee changes

SKY Holders¶

Actively participate in governance voting
Understand the protocol's long-term roadmap
Monitor revenue and surplus buffer health

Future Development¶

Endgame Plan¶

Split into multiple SubDAOs
Each SubDAO focuses on a specific business area
Improve governance efficiency and specialization

RWA Expansion¶

Add more real-world asset types
Deepen integration with traditional finance
Drive institutional adoption of the stablecoin

Product Innovation¶

Improve user experience and onboarding
Launch more savings and investment products
Explore new collateral types

Multi-Chain Strategy¶

Expand to Layer 2 and other L1s
Improve accessibility and reduce costs