Sky (ex-MakerDAO)

Sky, known until August 2024 as MakerDAO, is the protocol behind DAI and its successor USDS, two decentralized dollar stablecoins created by users who lock collateral. Launched in December 2017 and founded by Rune Christensen, it is one of the oldest DeFi protocols on Ethereum. Its governance token, SKY, replaced MKR at a rate of 24,000 SKY per MKR. This page explains how Sky works, what USDS, the Sky Savings Rate and the SKY token do, how the DAO is organized and which risks remain.

What Sky does

Sky lets users borrow newly minted stablecoins against crypto collateral held in vaults, and lets holders earn the Sky Savings Rate by depositing USDS (as sUSDS). DAI still exists and can be upgraded to USDS one-for-one at any time. Beyond crypto loans, a significant part of the backing is invested in short-term government debt and other real-world assets, which provides much of the protocol’s revenue. USDS is available on Ethereum and, through bridges, on Base, Arbitrum, OP Mainnet, Unichain, Avalanche and Solana.

How the protocol works

A borrower opens a vault, deposits collateral worth more than the loan and mints USDS. If the collateral value falls below the required ratio, the vault is liquidated through an auction. Prices reach the system through an oracle network and pass through an Oracle Security Module, which delays new prices by an hour so governance can react to a manipulated feed. Since 2024 the protocol has been reorganized under the Endgame plan: specialized units called Sky Stars, or agents, such as Spark (lending and liquidity), Grove (real-world assets), Keel and Obex, deploy part of the reserves under rules written in the Sky Atlas.

The SKY token

SKY is the governance token and the result of the MKR upgrade at a fixed 1:24,000 rate. Since May 2025 it has been the sole governance token; conversion from MKR is one-way, and since September 2025 late converters pay a Delayed Upgrade Penalty that rises by one percentage point every three months. Nearly all of the roughly 23.4 billion SKY supply circulates. Holders can stake SKY in the Staking Engine to earn rewards and vote, and the Smart Burn Engine uses surplus protocol revenue to buy back SKY on the market.

Governance

SKY holders vote in polls and executive votes on vote.sky.money; an executive proposal takes effect once it gathers more voting weight than the current one, after a timelock. The rules of the system are written in the Sky Atlas, a constitution-like document that defines the role of each agent and facilitator. Critics point out that influence is concentrated among a few large holders and that founder Rune Christensen plays a central role in strategic decisions.

History and key dates

• 16 December 2017: $12 million MKR sale led by a16z and Polychain Capital; Dai launches on Ethereum days later.
• September 2018: a16z crypto buys 6% of MKR for $15 million.
• 18 November 2019: Multi-Collateral Dai and the Dai Savings Rate go live.
• December 2019: Paradigm and Dragonfly buy $27.5 million of MKR.
• 12 March 2020: Black Thursday; oracle delays and failed auctions leave the system with bad debt.
• 2021: the Maker Foundation returns its MKR to the DAO and winds down.
• 27 August 2024: rebrand to Sky; USDS and SKY launch on 18 September 2024.
• May 2025: SKY becomes the sole governance token.

Security and risks

Core contracts have been audited by ChainSecurity, Cantina and Sherlock, among others, and the original Maker system has operated for almost nine years. The main stress event was Black Thursday in March 2020, when collapsing prices and congested auctions let some vaults be liquidated for almost nothing. Other risks:

• Collateral and real-world asset risk: USDS depends on crypto collateral and on off-chain assets held through legal structures.
• Centralized stablecoin exposure: part of the reserves sit in USDC and similar coins.
• Freeze and upgrade powers: the 2024 debate over a possible USDS freeze function showed that governance can change token rules.
• Governance risk: concentrated voting power could push through harmful changes.
• Regulatory risk: rules for dollar stablecoins in the US and the EU may affect how USDS can be offered.

Our risk score is 3 out of 5: a long track record and solid audits, but complex governance, real-world asset exposure and centralization debates.

How to use Sky safely

• Use sky.money or the official app, and verify the USDS and SKY contract addresses.
• Keep vaults well above the liquidation ratio and watch collateral prices.
• If you still hold MKR, read the official upgrade guide; the penalty for late conversion keeps rising.
• Compare USDS with other models in our stablecoin guide and our DeFi guide.