What is USDS (USDS)?

USDS is the dollar stablecoin of Sky Protocol, which is MakerDAO under a new name. The rebrand landed on 27 August 2024 as the first product of the Endgame plan, and USDS is DAI's successor — not its replacement, since DAI still exists and the two convert one-for-one at no cost through Sky's upgrade contract.

The mechanism is the one MakerDAO spent seven years proving. You lock collateral worth more than the dollars you take out and mint USDS against it; you repay to unlock. Overcollateralisation, not a bank account, is what makes the dollar good. Where the modern protocol departs from the 2017 version is what counts as collateral: alongside ETH and staked ETH sits a large allocation to tokenised US Treasuries, which is where most of the protocol's income now comes from.

USDS versus DAI

Mechanically they are the same claim on the same collateral pool and convert freely. Two differences matter. USDS is the one Sky develops, integrates and pays the savings rate on, so DAI is increasingly the legacy path. And USDS carries a freeze capability that DAI does not — the subject of the risks section below, and the reason a meaningful minority of holders stayed on DAI deliberately.

• Savings: deposit USDS into the Sky Savings Module and receive sUSDS, which accrues the Sky Savings Rate. This is the largest single use.
• DeFi collateral across Ethereum lending markets, where USDS inherited DAI's integrations.
• Borrowing: lock ETH or staked ETH, mint USDS against it, keep the upside on the collateral. The original Maker use case, still running.
• Cross-chain, including Solana, where Sky deployed to reach an audience Ethereum fees price out.

What USDS is not used for, much, is payments. Its holders are DeFi-native, and the demand is for yield and for collateral rather than for settlement.

USDS is minted against collateral and burned on repayment, so supply reflects borrowing demand and savings inflows rather than a schedule. Protocol collateral stood at $12.32bn against about $10.04bn of USDS in mid-2026 — the overcollateralisation is the buffer, and the ratio is the number to watch rather than the supply.

Growth of roughly 97% year on year through mid-2026 makes Sky the third-largest dollar stablecoin issuer once USDS and DAI are counted together, behind Tether and Circle. That came largely from the savings rate being competitive with what a retail holder could get elsewhere, and from the DAI migration converting an existing base rather than only winning new one.

Where the yield is generated

Two sources: stability fees paid by borrowers, and interest on the protocol's tokenised Treasury holdings. The second now dominates, which is worth stating plainly — a DeFi protocol's savings rate is substantially a pass-through of US government interest, and it will follow that rate down. The fall from above 8% in 2024 to 3.75% in Q2 2026 is mostly that, not a change in protocol health.

SKY is the separate governance token, successor to MKR. It is not USDS, carries no claim on the collateral, and votes the parameters — including the savings rate.

There is no validator staking. "Staking" USDS means depositing into the Sky Savings Module and receiving sUSDS, an ERC-20 whose redemption value rises over time as the Sky Savings Rate accrues. No lockup, no slashing, withdraw whenever.

The Sky Savings Rate is the successor to the DAI Savings Rate that MakerDAO ran from 2019 to 2024. It is set by SKY governance, which means it is a decision rather than a market rate: token holders vote it up to attract deposits and down to protect the protocol's margin.

It stood at 3.75% in Q2 2026, having exceeded 8% during 2024. Judge it against what the protocol earns — when the savings rate approaches the yield on the Treasury collateral, the margin that funds everything else disappears, and governance has always cut before that happens.

The freeze function, and why it was contentious

Shortly after the rebrand, Sky governance voted to add a blacklist capability to USDS, letting the DAO block specific addresses from moving balances in response to legal or compliance demands. DAI never had this, and its absence was central to DAI's pitch for a decade.

The governance forum argument was sharp and both sides were right about something. Critics called it a contradiction: a decentralised stablecoin with a censorship switch. Proponents pointed out that holding tokenised Treasuries at scale, and keeping regulated partners, is not possible without compliance hooks. What is not in dispute is the outcome — USDS is more controllable than DAI, and anyone choosing between them should choose on that basis rather than on the branding.

Real-world asset concentration

Most of the protocol's income comes from tokenised Treasury exposure held through counterparties. That is a good trade in a high-rate environment and it introduces exactly the dependencies MakerDAO originally existed to avoid: custodians, legal wrappers, and a chain of claims that resolves off-chain. A failure there is not a smart contract problem and cannot be fixed by one.

Governance concentration

The savings rate, the collateral list and the freeze function are all decided by SKY voters. Turnout in DAO votes is habitually low and large holders decide outcomes. The parameters that determine whether you get paid are set by a small group you did not elect.

Collateral volatility

The crypto-collateralised portion still carries liquidation risk in a sharp drawdown. Maker survived March 2020 — with an auction failure that cost the protocol around $8m and forced an MKR dilution to recapitalise — and the system was rebuilt around that lesson. It remains the historical precedent for what a violent move does to this design.