Sky Protocol marks a pivotal transformation in the decentralized finance (DeFi) landscape, representing the rebranded and reimagined future of MakerDAO. With the introduction of new tokens—SKY and USDS—and a bold strategic vision known as the Endgame Plan, Sky Protocol aims to redefine accessibility, decentralization, and sustainability in DeFi. This article explores the core components, features, tokenomics, and roadmap behind this next-generation protocol.
What Was MakerDAO?
MakerDAO, launched in 2014 on the Ethereum blockchain, pioneered decentralized lending by enabling users to generate the DAI stablecoin through over-collateralized debt positions (CDPs). As one of the earliest and most influential DeFi projects, it introduced a governance model powered by its MKR token, allowing holders to vote on critical system parameters such as stability fees, collateral types, and risk controls.
However, despite its success, MakerDAO faced challenges related to centralization risks—particularly its reliance on centralized stablecoins like USDC—and scalability limitations. To address these issues and position itself for mass adoption, the team unveiled a comprehensive overhaul: Sky Protocol.
On August 27, 2024, MakerDAO officially transitioned into Sky Protocol, launching a new identity and infrastructure designed to make DeFi more resilient, inclusive, and user-friendly.
👉 Discover how decentralized protocols are shaping the future of finance
What Is Sky Protocol?
Sky Protocol is a decentralized financial ecosystem centered around USDS, a newly branded decentralized stablecoin that evolved from DAI. The rebranding isn’t merely cosmetic—it reflects a fundamental shift in architecture, governance, and long-term vision.
Key changes introduced with Sky Protocol include:
- DAI is now USDS: The decentralized stablecoin retains its peg to the US dollar but operates under enhanced decentralization principles.
- New governance token SKY: Replaces MKR with a more scalable and inclusive tokenomics model.
- Sky.money: The new official website and brand identity.
- Sky Stars: Former SubDAOs of MakerDAO are now independent decentralized projects within the Sky ecosystem, each capable of issuing their own governance tokens and managing autonomous treasuries.
This evolution supports a modular, community-driven framework where innovation can thrive across specialized domains—lending, yield generation, cross-chain interoperability, and governance.
Core Features of Sky Protocol
Sky Token Rewards
Sky Token Rewards incentivizes users to provide liquidity or hold USDS within the protocol. In return, participants earn SKY tokens as rewards. The distribution rate depends on several dynamic factors:
- Ecosystem-wide token emission policies set by Sky governance
- Market value of the reward token
- Individual contribution relative to total assets in the rewards pool
This mechanism encourages long-term participation while aligning user incentives with protocol growth.
Sky Savings Rate
Users can deposit USDS into the Sky Savings Module to receive sUSDS, a yield-bearing token that accrues interest over time. This feature functions similarly to a decentralized savings account, offering predictable returns without requiring active trading or complex strategies.
As of October 2024, Sky offers an annualized savings rate of up to 6.25%, making it one of the most competitive passive income options in DeFi.
Trade
The Trade module enables seamless swapping of nine major assets—including USDS, sUSDS, SKY, DAI, MKR, ETH, WETH, USDT, and USDC—via integration with Cow Protocol’s advanced order routing system. This ensures optimal pricing, reduced slippage, and protection against front-running.
Upgrade
The Upgrade tool allows legacy users to convert their existing DAI and MKR tokens into the new standards:
- 1 DAI = 1 USDS
- 1 MKR = 24,000 SKY
This conversion is free, unlimited, and designed to ensure a smooth transition for all stakeholders.
Activation & Sealed Activation
Activation lets users stake SKY tokens to earn additional rewards in USDS or tokens from partner projects called Sky Stars.
Sealed Activation takes this further by rewarding governance participation. Users who vote on proposals using SKY or legacy MKR tokens accumulate bonus rewards—promoting active involvement in shaping the protocol’s future.
SkyLink
SkyLink is a native cross-chain bridge that facilitates secure asset transfers between Ethereum and Layer 2 networks. By enabling efficient movement of USDS, SKY, and other ecosystem assets, SkyLink enhances capital efficiency and reduces transaction costs for users across multiple chains.
👉 Learn how cross-chain bridges are transforming DeFi interoperability
Understanding the Endgame Plan
The Endgame Plan is the strategic blueprint guiding Sky Protocol’s transformation. Announced by founder Rune Christensen in May 2023, it outlines a five-phase rollout over three years aimed at decentralizing control, improving scalability, and achieving full independence from centralized collateral.
Phase 1: Brand Consolidation & Token Launch
Merge Maker and DAI into a unified brand—Sky—and launch SKY and USDS. Enable free migration from MKR and DAI.
Phase 2: Launch of Sky Stars
Deploy six initial SubDAOs (now called Sky Stars), including two FacilitatorDAOs and four AllocatorDAOs. Each focuses on specific operational roles such as treasury management, risk assessment, or product development.
Phase 3: AI-Powered Governance Tools
Introduce intuitive dashboards and analytics powered by artificial intelligence to simplify governance participation for non-technical users.
Phase 4: Incentivized Governance Participation
Launch the Sagittarius Lockstake Engine (SLE), allowing users to lock SKY or SubDAO tokens to earn revenue shares from protocol activities.
Phase 5: Dedicated Blockchain
Build a custom blockchain tailored for Sky’s governance and security needs—marking full sovereignty from Ethereum execution layer constraints.
Network Performance & Adoption
As of October 3, 2024, Sky Protocol reports strong adoption metrics:
- Over 605,300 users
- Total Value Locked (TVL): $12.57 billion
- Savings rate on USDS: Up to 6.25% APY
These figures underscore growing confidence in the protocol’s stability and utility.
SKY Token Overview
- Name: Sky Protocol
- Ticker: SKY
- Blockchain: Ethereum
- Standard: ERC-20
- Contract Address:
0x56072c95faa701256059aa122697b133aded9279 - Token Type: Utility & Governance
- Total Supply: 1,093,984,555
- Circulating Supply: Data pending release
What Is SKY Used For?
SKY serves as the backbone of decentralized decision-making within the Sky ecosystem. Holders can:
- Vote on governance proposals
- Earn staking rewards via Activation
- Participate in Sealed Activation for bonus incentives
- Trade for USDS or other ecosystem tokens
It replaces MKR with a more equitable distribution model and broader use cases.
Where to Store SKY Tokens?
Compatible wallets include:
- MetaMask
- Rabby Wallet
- Trust Wallet
These support ERC-20 tokens and integrate seamlessly with DeFi platforms.
Where to Buy SKY?
SKY is currently traded on Uniswap, with daily trading volume averaging around $1.4 million. Liquidity is expected to grow as more exchanges list the token post-transition.
👉 Explore leading decentralized exchanges for token trading
Development Roadmap & Investors
While detailed release schedules remain under development, the Endgame Plan provides a clear multi-year trajectory toward full decentralization and technological independence.
Sky Protocol has raised $54.5 million across three funding rounds from top-tier investors:
- December 15, 2017: $12 million (a16z, Polychain Capital)
- September 24, 2018: $15 million (a16z)
- December 19, 2019: $27.5 million (Dragonfly Capital, Paradigm)
These strategic investments have fueled research, development, and global expansion efforts.
Frequently Asked Questions (FAQ)
Q: Is USDS the same as DAI?
A: Yes—USDS is the rebranded version of DAI under Sky Protocol. It maintains the same dollar peg and over-collateralization model but operates under improved decentralization standards.
Q: Can I still use my old DAI and MKR tokens?
A: Absolutely. You can upgrade DAI to USDS and MKR to SKY at a fixed rate through the Upgrade module—free of charge.
Q: How does Sky improve upon MakerDAO’s weaknesses?
A: Sky reduces dependency on centralized stablecoins, introduces AI-assisted governance tools, incentivizes participation, and plans a dedicated blockchain for greater autonomy.
Q: Is SKY an upgrade or replacement for MKR?
A: SKY fully replaces MKR as the governance token at a conversion rate of 1 MKR = 24,000 SKY.
Q: Does Sky Protocol rely on centralized assets?
A: While some collateral remains off-chain during transition phases, the Endgame Plan targets full decentralization by minimizing reliance on centralized stablecoins like USDC.
Q: How secure is SkyLink?
A: SkyLink uses audited smart contracts and multi-signature validation mechanisms to ensure secure cross-chain transfers between Ethereum and L2s.
Final Thoughts
Sky Protocol represents a bold leap forward for DeFi—one that builds on MakerDAO’s legacy while addressing its structural limitations. With innovative features like Sky Token Rewards, sUSDS savings accounts, AI-enhanced governance, and a clear path toward full decentralization via the Endgame Plan, Sky is positioning itself as a cornerstone of next-generation finance.
Whether you're a long-time DeFi user or new to decentralized ecosystems, understanding Sky Protocol offers valuable insight into where decentralized finance is headed in 2025 and beyond.
Disclaimer: This article does not constitute financial advice. Always conduct your own research before making investment decisions.