What is Sky (SKY)?

Sky, previously known as MakerDAO, is one of the most influential projects in decentralised finance (DeFi). In 2024, MakerDAO rebranded to Sky as part of its long-term Endgame plan, introducing new versions of its stablecoin and governance tokens.

Sky remains a decentralised autonomous organisation (DAO), which means decisions are made by token holders rather than a central authority. Holders of its original token MKR, or its new token SKY, can vote on proposals that shape the protocol.

On the Sky platform, users can generate stablecoins, USDS (Sky Dollar) or the legacy DAI, by locking up crypto assets in smart contracts. Supported assets include ETH, BAT, USDC, TUSD, ZRX, MANA and more.

USDS and DAI are both stablecoins pegged to the US Dollar, giving users access to liquidity while holding onto their underlying crypto. This makes Sky useful for managing volatility, accessing cash without selling crypto, and maintaining a predictable unit of value.

How does this work in practice? 

Imagine an Ethereum investor who needs short term liquidity but does not want to sell their ETH. Instead of cashing out, they use Sky. They lock up their ETH in a Collateralised Debt Position (CDP), also called a vault. In return, they generate USDS, which is pegged to the US Dollar. They can spend USDS while still retaining their ETH exposure.

To unlock their ETH later, they must repay the USDS plus a stability fee. The stability fee acts like interest and helps maintain the peg. This process works like a decentralised loan system, managed entirely by smart contracts instead of a central authority.

How does Sky work? 

To create USDS, users first deposit Ethereum-based assets into a smart contract known as a Collateralised Debt Position. The value of this collateral determines how much USDS can be generated. For example, if $150 worth of ETH is deposited with a collateralisation ratio of 150 percent, the user can generate up to $100 in USDS.

The stability of USDS is maintained through several mechanisms. A stability fee is charged on borrowed USDS, which discourages excessive minting and helps maintain the peg to the US Dollar. If the value of the collateral falls too low, Sky initiates a debt auction, selling the collateral to recover the required amount of USDS. Conversely, if the system accumulates excess USDS, a surplus auction is triggered in which SKY tokens are bought back and removed from circulation, thereby balancing the protocol.

What is the cryptocurrency of Sky?

Sky operates with two cryptocurrencies. USDS, which replaced DAI as the main stablecoin, is designed to remain pegged to the US Dollar. Users create USDS by locking collateral such as ETH, and it is widely used across decentralised finance as a stable unit of value.

The SKY token, which replaced MKR, is the governance and utility crypto of the protocol. Holders of SKY participate in decision-making, including changes to collateral types, stability fees and other parameters. SKY also plays a vital role in risk management because in cases of undercollateralisation, new SKY can be created and sold to stabilise the system. Together, USDS provides liquidity and stability, while SKY ensures community governance and long-term sustainability.

Who founded SKY?

MakerDAO, the project that would later become Sky, was founded in 2015 by Rune Christensen. The goal was to address the volatility of cryptocurrencies such as Bitcoin and Ethereum by creating a decentralised stablecoin that could hold its value. This led to the creation of DAI, which became one of the first widely adopted decentralised stablecoins.

In 2023, Christensen announced a plan called Endgame, which aimed to simplify the governance of MakerDAO and ensure its resilience in the long term. The plan culminated in the 2024 rebrand to Sky, with the introduction of the new stablecoin USDS and the new governance token SKY. Users who prefer to remain with the original tokens can still use DAI and MKR, which continue to function within the system as legacy assets.

Useful tools 

Sky website
Sky on X

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