What is Sky protocol and the USDS stablecoin?

Sky protocol is the decentralized system on Ethereum that issues the USDS and DAI stablecoins. It was known as MakerDAO until August 2024, when it rebranded and introduced new tokens. How DAI works and what backs it is covered in what is DAI, and what backs it?, so this guide focuses on what Sky added.

What was the MakerDAO to Sky change?

The Block reported on August 27, 2024 that MakerDAO was renaming itself Sky, and the new tokens launched that September. The rebrand introduced:

• USDS, also called Sky Dollar, which DAI holders can upgrade to at a 1 to 1 rate.
• SKY, the governance token, with each MKR convertible into 24,000 SKY.
• Stars, the new name for MakerDAO's planned SubDAOs. The lending protocol Spark was named the first Star.

DAI and MKR stayed in use. Sky's documents say SKY now replaces MKR for on-chain votes, and the MKR to SKY route has become one way. CryptoTicker reported that a penalty on late upgrades began in September 2025 and rose by one percentage point about every three months, reaching 4% by June 2026.

What is the USDS stablecoin?

USDS is a stablecoin designed to stay worth one US dollar. It shares the same backing system as DAI. Sky's documents describe a converter contract that swaps DAI and USDS at a fixed 1 to 1 rate in either direction with no fees, and say fees can never be added to that route.

USDS started on Ethereum. Block Analitica reported in February 2025 that it had also reached Base and Solana through SkyLink, Sky's bridge, with Spark supplying liquidity on other chains.

What does Sky protocol do for USDS holders?

Sky gives USDS holders two optional ways to earn, according to The Block:

1. Sky Savings Rate. Depositing USDS returns sUSDS, a yield-bearing stablecoin. Sky's documents describe sUSDS as a standard vault token that charges no deposit or withdrawal fees. The rate is set by governance and changes over time.
2. Sky Token Rewards. Supplying USDS through the Sky.money app earns SKY instead of interest. At launch the program paid out 600 million SKY a year across participants.

Both programs launched with restrictions in some countries, including the US and UK, The Block said.

What is the SKY token used for?

SKY holders vote on fees, collateral and savings rates, which makes Sky a type of DAO. The protocol also uses surplus income from borrowing fees and Treasury bill yields, after paying savers and costs, to buy SKY on decentralized exchanges. KuCoin News reported in February 2026 that one week's buyback came to about 31 million SKY.

USDS is not issued by a bank and has no deposit insurance. Its value depends on collateral, smart contracts and governance decisions, all of which carry risk.