Sky is the rebranded MakerDAO protocol, the longest-running and largest crypto-collateralized stablecoin issuer in DeFi. Sky issues two stablecoins: DAI, the original 2017 crypto-collateralized dollar, and USDS, the 2024 flagship designed for institutional integration with optional KYC features. Combined supply is roughly $13B in early 2026, with USDS at ~$8.7B overtaking DAI in raw size. Unlike fiat-backed issuers, Sky has no corporate parent — the protocol is governed onchain by SKY token holders (the renamed MKR), with operations executed through smart contracts and subDAOs (now "Stars"). This article walks through how DAI and USDS are collateralized, what the Endgame plan changed, how the peg holds, and where Sky-issued stablecoins fit relative to fiat-backed alternatives.
Sky is the only credibly decentralized stablecoin issuer at scale. That property comes with structural trade-offs: governance is slower than corporate decision-making, regulatory engagement is harder, but the protocol cannot be unilaterally shut down or have reserves frozen by a single counterparty. Understanding the actual collateral mix, the peg-stability mechanisms, and the Endgame transition is the prerequisite for assessing where DAI and USDS fit in stablecoin operations.
What Is Sky?
Sky is the protocol formerly known as MakerDAO. The rebrand happened in August 2024 as part of the Endgame Plan, the multi-year restructuring proposed by founder Rune Christensen. The Endgame documentation is the primary source on the redesign rationale and structure.
The protocol itself dates to 2017, when MakerDAO launched Single-Collateral DAI (SAI), backed only by ETH. Multi-Collateral DAI launched in 2019, expanding the collateral set to include other assets and adding the savings rate (DSR) for yield-bearing DAI deposits. The rebrand to Sky introduced USDS as a parallel token to DAI, the SKY governance token (replacing MKR at a 24,000:1 ratio), and the Stars subDAO structure (replacing the original SubDAO concept).
The legal structure is a Cayman Foundation (the Sky Foundation) plus various supporting entities. Critically, the foundation does not control protocol operations — those are executed by smart contracts, with parameter changes flowing through SKY token governance votes. The MakerDAO LLC (a Marshall Islands DAO LLC) provides the legal wrapper for protocol operations where one is required.
How DAI and USDS Are Collateralized
DAI and USDS are minted against onchain collateral via the Sky Vault system. Different collateral types have different parameters — collateral ratio, stability fee, debt ceiling, liquidation penalty — set by SKY governance. The major collateral categories are:
Crypto collateral: ETH, staked ETH (stETH, wstETH), wBTC, and other onchain assets. Users lock collateral in a Vault and mint DAI or USDS up to the collateral ratio (typically 145–175% depending on asset). If collateral value drops below the liquidation ratio, the Vault is auctioned and the debt repaid.
Real-world assets (RWA): Tokenized U.S. Treasuries via partners including Monetalis, BlockTower, and others. RWA holdings cross $1.5B+ in early 2026 and are the largest single source of protocol revenue. MakerBurn dashboards track RWA exposures in real time.
USDC Peg Stability Module (PSM): A swap that converts USDC to DAI 1:1 at zero spread (small fee). The PSM is not collateralized in the traditional sense — it's a 1:1 swap pool that lets USDC effectively back DAI. The PSM holds a meaningful share of DAI's effective backing.
D3M (Direct Deposit Module): Direct DAI minting into Aave, Compound, and Spark lending markets to balance the lending rates against Sky's own savings rate.
The combined effect is that DAI and USDS are not purely crypto-collateralized in the original 2017 sense. The current collateral mix is a blend of crypto, USDC (via PSM), and RWA (via Treasury vaults). The MakerDAO/DAI explainer covers this in more depth.
The Peg Stability Mechanisms
DAI and USDS hold their $1 peg through a combination of mechanisms:
The PSM (Peg Stability Module): Lets anyone swap USDC ↔ DAI 1:1 (with a small fee, typically zero on the USDC→DAI direction). When DAI trades above $1, arbitrageurs swap USDC for DAI via PSM and sell DAI on the open market. When DAI trades below $1, arbitrageurs buy DAI on the open market and swap to USDC via PSM.
The Sky Savings Rate (SSR, formerly DSR): Holders can deposit DAI/USDS into the savings module to earn yield. Raising the SSR increases demand for the token and pushes the peg up; lowering it does the opposite.
Vault stability fees: The interest rate borrowers pay on minted debt. Raising the fee discourages new minting (reduces supply growth); lowering it encourages it.
Surplus and emergency mechanisms: The Surplus Buffer holds protocol revenue as a loss-absorbing layer. In extreme scenarios, the Emergency Shutdown mechanism can be triggered by SKY governance to wind down the protocol orderly.
The combination of these tools has held DAI within a tight band around $1 since 2019, with brief excursions during the March 2020 ETH crash (which led to the 2020 collateral auction redesign) and the March 2023 USDC depeg (which dragged DAI down by sympathy because USDC backed a meaningful share of DAI through PSM).
Endgame and the Sky Rebrand
The Endgame Plan, approved by MKR governance in 2023 and rolled out through 2024, restructured the protocol around three pillars:
USDS as the institutional token: A new stablecoin parallel to DAI, with optional features like KYC-gated access for institutional integrations and freeze functionality for compliance scenarios. DAI remains fully decentralized for users who prefer that structure; USDS adds optional regulatory primitives.
SKY as the governance token: Replaces MKR at a 24,000:1 conversion ratio. SKY token economics include staking rewards funded by protocol revenue, designed to align long-term holders.
Stars (subDAOs): Independent verticals running specific protocol functions — SparkLend (the lending arm), the RWA vaults, etc. Each Star has its own governance token and operational autonomy within the broader Sky framework.
The rebrand is partly positioning — Sky targets institutional integration in a way MakerDAO did not — and partly structural, with the parallel-token model (DAI + USDS) letting different user segments access the protocol on terms that fit them.
Onchain Transparency vs Off-Chain Attestations
Unlike fiat-backed issuers, Sky has no off-chain reserves to attest to. Collateral is held in onchain Vaults (transparent on Ethereum), the USDC PSM holds USDC in an Ethereum smart contract (transparent), and the RWA vaults are visible as ERC-20 tokens that themselves point to off-chain custody (the off-chain leg requires trust in the RWA partner — Monetalis, BlockTower, and others).
Real-time collateral and supply are observable on MakerBurn, DaiStats, and DeFiLlama's Sky page. There's no monthly attestation report because the data is continuously visible onchain. The trust shift is from "trust the attestation" to "trust the smart contracts and the onchain data feeds" — a different risk model, not a strictly lower one.
The exception is the RWA exposures. Tokenized Treasury vaults are observable as token balances onchain, but verifying that the off-chain Treasury bills actually exist requires trusting the RWA partner's attestations. Monetalis publishes regular reports on its Sky-affiliated vaults, but the trust assumption is non-trivial.
Where DAI and USDS Fit
DAI is the dominant decentralized stablecoin in DeFi. Aave, Compound, Curve, Uniswap, and most lending and AMM protocols support DAI as a primary stablecoin asset. For DeFi-native applications where censorship resistance matters, DAI is typically the operating asset of choice.
USDS is positioned for institutional integration where the Sky governance model is acceptable but optional regulatory primitives are required. Spark (the Sky-affiliated lending protocol) operates as the primary distribution venue for USDS, with savings-rate exposure available through sUSDS and lending markets across Aave, Morpho, and Spark itself.
Neither is the natural choice for U.S.-regulated payment processors who need a single accountable issuer — that's the USDC and PYUSD use case. Stablecoin swap aggregators covers DAI/USDS routing alongside fiat-backed options.
Eco's Role
Eco routes DAI and USDS alongside USDC, USDT, PYUSD, and USDe across 15+ supported chains. For DAI specifically, Eco selects between Sky's own bridge (Multichain successor), L2-native canonical bridges (Optimism, Arbitrum), and aggregator paths depending on chain pair and size. The orchestration layer is issuer-agnostic; teams using DAI for DeFi-native flows and USDC for regulated payments can route both through a single integration.
FAQ
What's the difference between DAI and USDS?
DAI is the original 2017 crypto-collateralized stablecoin, fully decentralized with no KYC or freeze functionality. USDS is the 2024 flagship designed for institutional adoption with optional KYC-gated access and freeze functions for compliance scenarios. Both run inside Sky governance; DAI ↔ USDS conversion happens 1:1 via the protocol.
Is DAI fully crypto-collateralized?
No. The current collateral mix includes crypto vaults (ETH, staked ETH, wBTC), the USDC Peg Stability Module, and tokenized real-world Treasuries via Monetalis and BlockTower. Pure crypto collateral was the 2017 model; today's DAI is collateralized by a blend. The MakerDAO/DAI primer covers this in detail.
Who controls the Sky protocol?
SKY token holders. Governance votes set parameters — collateral ratios, stability fees, savings rate, RWA approvals. The Sky Foundation provides legal wrapper but does not control operations. Smart contracts execute parameter changes after governance votes pass.
What is the Sky Savings Rate?
The SSR (formerly DSR — DAI Savings Rate) is the yield Sky pays on DAI/USDS deposited into the savings module. Yield is funded by protocol revenue from stability fees and RWA holdings. The rate is set by SKY governance and varies based on protocol economics; rates of 5–8% are typical when RWA yields are high.
Is USDS regulated?
Sky has no corporate issuer to license. USDS includes optional KYC-gated access features that integrating partners can use for their own compliance, but USDS itself is not registered as a payment stablecoin under any specific regulatory regime. The decentralized governance structure does not fit existing stablecoin regulatory frameworks like NY DFS BitLicense or MiCA.