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L4 · Synthetic dollars & yield

Sky (ex-MakerDAO)

The decentralized dollar, rebranded from Maker/DAI.

What it is

Sky is the 2024 rebrand and 'Endgame' upgrade of MakerDAO — the oldest and largest decentralized-stablecoin issuer in DeFi. It issues USDS, the 1:1 successor to DAI (both still circulate), and sUSDS, an ERC-4626 savings token that accrues the Sky Savings Rate. SKY is the sole governance token (upgraded from MKR at 24,000:1). Revenue from collateral stability fees, USDC-backed T-bill reserves, and tokenized-RWA strategies funds the savings rate and SKY Token Rewards. The protocol is being broken into semi-autonomous SubDAOs called 'Stars', the first and largest being Spark.

How it works

  1. USDS is minted against crypto collateral (ETH, wstETH, etc.) via stability-fee vaults, against USDC 1:1 through the Peg Stability Module (PSM), or by upgrading DAI 1:1 through the SkyMoneyConverter (zero fee, zero slippage).
  2. Holders deposit USDS into sUSDS (ERC-4626 vault) to earn the Sky Savings Rate; the sUSDS↔USDS exchange rate drifts upward continuously (no rebasing).
  3. Separately, depositing USDS can earn Sky Token Rewards (STR) — ~600M SKY/yr distributed to USDS suppliers — paid in SKY or partner tokens.
  4. Yield is funded by three revenue streams: vault stability fees, T-bill yield on PSM/USDC reserves via the Sky Allocator system, and curated tokenized-RWA strategies (Monetalis, BlockTower, etc.).
  5. SKY governs all parameters (savings rate, collateral, allocations) on-chain; SKY can be staked in the Staking Engine to borrow USDS, delegate votes, and earn rewards.
  6. Spark (the first Star) borrows from Sky's reserves via the Spark Liquidity Layer to deploy USDS/sUSDS across DeFi, RWAs, and multiple chains.

Differentiators

  • Most established decentralized stablecoin — direct DAI heritage, 2017-onward track record, ~$11.7B USDS supply.
  • Native, governance-set on-chain savings rate (sUSDS) plus a second SKY-denominated reward stream (STR) on top.
  • RWA + USDC T-bill reserves are now the largest revenue source — a hybrid of DeFi collateral and real-world yield.
  • Modular 'Star'/SubDAO architecture (Spark) lets specialized teams scale lending and multichain distribution without bloating the core.
  • Deeply composable: USDS is a plain ERC-20 and sUSDS an ERC-4626 vault, integrated across Aave, Pendle, Spark, and L2s.

Business model

Spread between revenue (collateral stability fees + USDC/RWA T-bill yield) and what it pays out via the Sky Savings Rate and SKY Token Rewards; protocol surplus accrues to the Sky treasury and backs SKY. Reported ~$123.8M gross revenue and ~$46M protocol surplus in Q1 2026.

Depends on

  • Collateral assets (ETH/wstETH and other crypto)
  • USDC + the PSM (large reserve component)
  • Tokenized RWAs / US Treasury market + asset managers (Monetalis, BlockTower)
  • Ethereum (and Spark-bridged L2s/Solana)
  • SKY governance

Risks

  • Collateral + RWA concentration risk: a large share of reserves sits in USDC and off-chain tokenized Treasuries, reintroducing centralized/counterparty exposure to a 'decentralized' dollar.
  • Governance risk: parameter and allocation decisions concentrated in SKY voting; SubDAO/Star structure adds complexity.
  • Rate-cut risk: the savings rate tracks Fed-funds-driven yield (cut from 6.5% to 4.5% in March, ~4.75% in 2026), so payouts compress as rates fall.
  • Regulatory pressure on decentralized issuers and on RWA/USDC reserves.
  • Migration friction: DAI, USDS, MKR, and SKY coexisting creates integration and liquidity-fragmentation complexity.
Product breakdown

The product lines

USDS

The decentralized dollar — DAI's 1:1 successor.

USDS is Sky's flagship overcollateralized stablecoin, the upgrade path from DAI at a fixed 1:1 rate with no fee. It's minted against crypto collateral via stability-fee vaults, against USDC 1:1 through the Peg Stability Module, or by converting DAI through the SkyMoneyConverter. It's a plain ERC-20 designed for institutional integration (with optional KYC-friendly features) and composes across DeFi.

  • Mint by upgrading DAI 1:1 (SkyMoneyConverter — lock/mint, burn/release, zero slippage).
  • Mint against USDC 1:1 via the PSM (small governance fee window) — the dominant reserve source.
  • Mint against crypto collateral (ETH, wstETH, etc.) in stability-fee vaults.
  • Reserves earn T-bill yield (USDC via Sky Allocator) + curated tokenized-RWA strategies; surplus backs the peg and the treasury.
Supply~$11.7B (Q1 2026)
BackingCrypto collateral + USDC + tokenized RWAs
DAI parity1:1, no-fee converter

sUSDS (Sky Savings Rate)

The on-chain savings account for USDS.

sUSDS is an ERC-4626 vault token: deposit USDS and receive sUSDS whose exchange rate against USDS rises continuously at the Sky Savings Rate. No rebasing, no lockup, no minimum, no fee — yield accrues into the redemption value and the token stays liquid and composable (Aave, Pendle, Spark, L2s).

  • Deposit USDS → mint sUSDS at the current exchange rate (value-accruing, not rebasing).
  • SSR set by SKY governance, broadly tracking Fed-funds-driven reserve yield (~4.75% in 2026; was 6.5%→4.5% in March).
  • Redeem sUSDS for USDS at any time at the accrued rate (e.g. ~1.094 USDS/sUSDS, Apr 2026).
  • Distinct from Sky Token Rewards — sUSDS pays USDS yield; STR pays SKY/partner tokens separately.
Rate~4.75% SSR (2026)
StandardERC-4626 vault
Savings TVL~$6.5B in sUSDS (2026)

Spark (first Star) + SKY governance

The SubDAO that scales lending + the token that governs it.

Spark is the first and largest 'Star' (SubDAO) of Sky — an open-source liquidity and lending platform with three modules: SparkLend (an Aave-V3-fork money market), Savings (spUSDS/sUSDS), and the Spark Liquidity Layer (SLL) that borrows from Sky's $7B+ reserves to mint, bridge, and deploy USDS/sUSDS across chains. SKY is the sole governance token of the core protocol (upgraded from MKR at 24,000:1); SPK is Spark's own token.

  • SLL routes Sky reserve liquidity to DeFi + RWA venues across Ethereum, Base, Arbitrum, OP Mainnet, and Unichain.
  • SparkLend: deposit USDS → receive spUSDS receipt token; yield distributed as additional spUSDS.
  • SKY: governs collateral, rates, and allocations; stake in the Staking Engine to borrow USDS, delegate votes, and earn rewards.
  • SPK: Spark's token (10B max supply; 65% farming rewards over 10y, 23% ecosystem/airdrops, 12% team).
Spark TVL~$4.8–5B (2026)
MKR→SKY24,000 SKY per MKR
SLL chainsEthereum, Base, Arbitrum, OP, Unichain
Deep dive

Architecture & mechanics

USDS / DAI lineage & the 1:1 upgrade

Sky is MakerDAO's 'Endgame' rebrand (August 2024). Rather than retire DAI, Sky launched USDS as a parallel, upgradeable dollar — both circulate side by side in 2026, with combined supply ~$13B (USDS ~$11.7B). The bridge between them is a smart-contract escrow, not a market.

  • SkyMoneyConverter: lock DAI → mint USDS (and burn USDS → release DAI) at a fixed 1:1 rate, zero fee, zero slippage, effectively infinite liquidity.
  • PSM still accepts USDC 1:1 (small governance fee window) to mint USDS — a major reserve component.
  • Why upgrade: USDS unlocks both sUSDS (SSR) and Sky Token Rewards (STR), which DAI's legacy DSR does not.
  • USDS adds optional institution-friendly features (e.g. freeze functionality) that DAI lacks — a deliberate trade-off vs. DAI's purer neutrality.

Sky Savings Rate — mechanics & funding

The SSR is an on-chain interest rate paid to sUSDS holders, set by SKY governance. sUSDS is ERC-4626: yield compounds into the share/USDS exchange rate (value-accruing), so balances don't rebase. It is funded from protocol revenue, not new issuance.

  • Three revenue streams fund it: (1) stability fees on collateralized USDS vaults; (2) T-bill yield on USDC/PSM reserves via the Sky Allocator; (3) curated tokenized-RWA strategies.
  • Rate tracks Fed-funds-driven reserve yield plus a thin protocol margin — cut from 6.5% to 4.5% in March 2026, ~4.75% through 2026.
  • sUSDS accrued ~1.094 USDS each by April 2026; redeemable anytime, no minimum, no fee.
  • Sky Token Rewards (STR) is a separate, stackable stream: ~600M SKY/yr to USDS suppliers, paid in SKY or partner tokens.

Stars / SubDAOs & the Spark architecture

The Endgame plan decomposes the monolith into semi-autonomous 'Stars' (SubDAOs), each with its own token, product focus, and treasury, tethered to core Sky via shared reserves, USDS integration, and rewards. Spark is the first and dominant Star.

  • Spark modules: SparkLend (Aave-V3 fork money market), Savings (spUSDS / sUSDS), and the Spark Liquidity Layer (SLL).
  • SLL mints/bridges/deploys USDS + sUSDS from Sky's $7B+ reserves across Ethereum, Base, Arbitrum One, OP Mainnet, and Unichain — the multichain distribution engine for USDS.
  • SparkLend issues spUSDS (~$405M USDS deposited [verify]); yield paid as additional spUSDS.
  • SPK token (10B max): 65% farming (10y), 23% ecosystem/airdrops, 12% team; 2026 roadmap targets a 'Spark Federation' veSPK governance model.

Governance, RWA collateral & risk

SKY is the sole governance token (MKR upgraded at 24,000:1; MKR↔SKY conversion subject to a Delayed Upgrade Penalty escalating 1%/quarter from Sept 2025). Governance controls collateral types, the savings rate, and reserve allocations — including the RWA and USDC exposure that now dominates revenue.

  • RWA holdings crossed ~$1.5B in early 2026 (tokenized US Treasuries via Monetalis, BlockTower, etc.) — the single largest revenue source.
  • Centralization tension: a 'decentralized' dollar increasingly backed by USDC + off-chain Treasuries reintroduces custodial/counterparty and regulatory risk.
  • SKY Staking Engine: stake SKY to borrow USDS, delegate voting power, and earn rewards.
  • Surplus: ~$123.8M gross revenue / ~$46M protocol surplus in Q1 2026 accrues to the treasury and backstops the system.
Builder's track

How it's built

Architecture

Sky exposes two clean primitives. USDS is a standard ERC-20 dollar; sUSDS is an ERC-4626 savings vault where the share→asset exchange rate rises at the Sky Savings Rate. Integrating savings is just an ERC-4626 deposit/redeem against the sUSDS contract — no custom rebasing logic, no claim step (yield is in the exchange rate). To source USDS, integrators either upgrade DAI 1:1 via the SkyMoneyConverter, mint from USDC 1:1 via the PSM, or buy on-market. Spark's Liquidity Layer extends USDS/sUSDS to Base, Arbitrum, OP, and Unichain for multichain integrations.

Integration shape

Treat sUSDS like any ERC-4626 vault: read previewDeposit/previewRedeem and convertToAssets to quote yield, call deposit/mint to enter and redeem/withdraw to exit. Use the USDS ERC-20 for balances/transfers/approvals. For DAI-based apps, route through the converter to standardize on USDS. Verify all addresses against developers.sky.money before mainnet use.

API surface

USDS.transfer / approve / balanceOf
Standard ERC-20 dollar operations.
sUSDS.deposit(assets, receiver)
Deposit USDS, mint sUSDS shares (ERC-4626).
sUSDS.redeem(shares, receiver, owner)
Burn sUSDS, withdraw accrued USDS.
sUSDS.convertToAssets(shares)
Read current USDS value of sUSDS — exposes the accrued SSR.
SkyMoneyConverter.daiToUsds / usdsToDai
Upgrade/downgrade DAI↔USDS 1:1, no fee. [verify method names]
PSM (USDC↔USDS)
Mint/redeem USDS against USDC 1:1 within a governance fee window. [verify]

Minimal integration

Deposit USDS into the sUSDS savings vault (ERC-4626) and read accrued value.

import { ethers } from 'ethers';

const USDS  = '0xdC035D45d973E3EC169d2276DDab16f1e407384F';
const SUSDS = '0xa3931d71877C0E7a3148CB7Eb4463524FEc27fbD'; // ERC-4626

const erc20 = new ethers.Contract(USDS, [
  'function approve(address,uint256) returns (bool)',
], signer);

const vault = new ethers.Contract(SUSDS, [
  'function deposit(uint256 assets,address receiver) returns (uint256)',
  'function convertToAssets(uint256 shares) view returns (uint256)',
  'function balanceOf(address) view returns (uint256)',
], signer);

const amount = ethers.parseUnits('1000', 18);   // 1,000 USDS
await (await erc20.approve(SUSDS, amount)).wait();
await (await vault.deposit(amount, await signer.getAddress())).wait();

// Yield accrues in the exchange rate — no claim needed:
const shares = await vault.balanceOf(await signer.getAddress());
const usdsValue = await vault.convertToAssets(shares); // > deposited over time

Build notes

  • sUSDS is value-accruing, not rebasing — never assume balanceOf grows; quote yield via convertToAssets/previewRedeem.
  • The Sky Savings Rate is set by SKY governance and changes (6.5%→4.5% in March 2026) — don't hardcode an APY.
  • Sky Token Rewards (STR) are a separate USDS-deposit program from sUSDS; integrate them independently if needed.
  • [verify all addresses, the SkyMoneyConverter/PSM method signatures, and current sUSDS deployment scope against developers.sky.money — sUSDS was Ethereum-only as of April 2026, with Spark SLL handling L2 distribution]