USDS (USDS)

USDS (USDS) is a dollar stablecoin issued by the Sky Protocol, the decentralized lending system formerly known as MakerDAO. Launched on Ethereum in September 2024 as the successor to Dai (DAI), it aims to stay worth one US dollar and is backed by a mix of crypto collateral, other stablecoins and real-world assets held by the protocol. Holders can deposit it to earn the Sky Savings Rate.

USDS and DAI are separate tokens run by the same protocol and can be converted into each other one for one at any time, in either direction. USDS is an ERC-20 token, not a blockchain. Unlike USDC or Tether (USDT), it has no single company that promises to redeem it for bank dollars; its value rests on over-collateralized loans and reserves managed by smart contracts and token-holder votes.

Think of USDS as a new edition of an old banknote. The organization that issued Dai decided to rename itself and print a fresh note with a few extra features, but it promised that anyone can walk up to the counter and swap an old note for a new one, or back again, at exactly one for one. Nothing is lost in the exchange.

The new note is kept steady the same way as the old one. People who want dollars lock up valuable assets and borrow USDS against them, always borrowing less than their deposit is worth. The organization also holds safe investments such as short-term government debt. Some of what borrowers pay in interest is passed to savers who park their USDS in a savings account run by software, a little like interest on a deposit account at a bank.

MakerDAO's co-founder Rune Christensen proposed the "Endgame" plan in 2022 to reorganize the protocol. In August 2024 MakerDAO announced that it would rebrand as Sky, with two new tokens: USDS in place of DAI and SKY in place of the MKR governance token, at a rate of 24,000 SKY per MKR. USDS went live on Ethereum on 18 September 2024. Holders of DAI were not forced to upgrade; both stablecoins continue to circulate, and the protocol later brought USDS to other networks through bridges.

In August 2025 S&P Global Ratings gave Sky Protocol a B- issuer credit rating, the first such rating for a decentralized finance protocol. It cited a heavy concentration of deposits, centralized decision-making and the protocol's thin capital buffer. At the time USDS had a supply of roughly 8 billion dollars, making it one of the largest stablecoins.

New USDS is created when a borrower opens a vault, a kind of collateralized debt position, and mints against collateral worth more than the loan. Loans that fall below their required collateral level are liquidated. The protocol also runs a stability module that swaps USDS for USDC at a fixed rate, which caps how far the price can drift, and it invests reserves in US Treasury bills and other yield-earning assets through approved partners. Operating units called Stars, the first of which is the lending platform Spark, deploy part of that capital on behalf of the protocol.

Holders who deposit USDS in the savings contract receive sUSDS, a yield-bearing stablecoin whose value in USDS rises over time. The rate is set by Sky governance and changes with market conditions. Growth works like compound interest:

• $V_0$ is the amount of USDS deposited.
• $r$ is the annual savings rate, written as a decimal.
• $t$ is the time held, in years.
• $V_t$ is the value of the sUSDS position, in USDS, after $t$ years.

For example, 10,000 USDS held for two years at an assumed rate of 4.5 percent grows to $10{,}000 \times 1.045^{2} = 10{,}920.25$ USDS. The figure is illustrative: the actual rate is reset by governance and can fall as well as rise. Holders can also earn SKY tokens through a separate rewards programme instead of the savings rate.

• Savings. Most demand for USDS comes from holders seeking the savings rate.
• Borrowing. Users mint USDS against crypto collateral rather than selling their assets.
• Trading and settlement. USDS is used on decentralized exchanges and lending markets.

Because USDS has no licensed issuer, it falls outside most rulebooks written for fiat-backed coins, such as the European Union's MiCA. Regulated exchanges in some markets therefore restrict it.

USDS carries the risks of its collateral, its smart contracts and the outside firms that hold its real-world assets. The S&P report pointed to concentrated governance: a small number of SKY holders, including the founder, carry much of the voting power. Some longtime DAI users criticized the rebrand as unnecessary and objected to features of the new token, and the large share of supply placed in the savings contract means demand depends heavily on the rate staying attractive.

• Sky
• Sky developer documentation