Sky: The First Bank Of DeFi

Every Friday, I’ll help you grow your knowledge base of the most influential apps and teams in DeFi by providing a high-level overview of projects that provide true value to the industry.  

If you followed crypto back in the early DeFi days (2018-2020), you’re probably familiar with MakerDAO: the first decentralized “bank” on Ethereum. 

MakerDAO’s origin goes all the way back to early 2015 – even before the Ethereum blockchain was fully functional. And when its app launched in 2017, DeFi was still just a concept – years away from being functional. 

It was the first project to create a stablecoin, DAI, which was backed entirely by crypto – specifically ETH. 

The MKR token played a central role as well. It was used as emergency collateral if excessive DAI liquidations resulted in bad debt (if the ETH backing it couldn’t be sold to pay off the full debt). It also granted its holders the ability to vote on things such as: 

While DAI was originally backed by ETH alone, it didn’t take long for DAO members to push for more forms of collateral.

The expansion began In 2019, when BAT became the second collateral asset approved by MKR holders. Things grew rapidly from there – a year later, DAI could be backed by 15 different tokens. And by early 2022, there were nearly 10B DAI in circulation.

By this point, most MKR holders have converted their tokens into SKY, but anyone still holding MKR can do so at any time.

The conversion ratio of 24,000 SKY per 1 MKR has been constant, intentionally creating a lower price per token (currently ~$0.07/SKY) to make it more appealing than a 4-figure price per MKR token.

You can think of SKY holders as bank members/stakeholders who can take part in governance decisions and deposit into the Sky Money app to earn interest. These stakeholders directly benefit from SKY buybacks – a form of revenue share. 

As we’ll see, SKY has a relatively high yield – not because it’s risky, but because Sky is consistently the leading revenue-generating app on Ethereum. In fact, its annual revenue has grown from $42.5M in 2023 to $239M in 2025.

Specifically, excess revenue from USDS transactions (borrowing, staking, etc.) is used to buy SKY tokens on the open market and redistribute them to stakers. Currently, SKY stakers can earn a 10.8% APY – paid fully in SKY.

Over the past year, 1.87B SKY tokens have been bought back by the protocol:

As part of the Endgame plan, DAI was replaced with the USDS stablecoin. While DAI can easily be redeemed for USDS at a 1:1 ratio, it continues to function in DeFi as it always has, and there are no plans to phase it out.

The combined value of DAI and USDS in circulation is currently over $11.5B, and rising fast – just since March 4th, total supply is up ~$2B.

While MakerDAO only offered staking for its native DAI stablecoin, Sky Protocol facilitates staking for both SKY and USDS.

There are two yield-bearing versions of USDS: sUSDS and stUSDS.

sUSDS is the more straightforward of the two – USDS stakers accrue more USDS tokens based on the Sky Savings Rate (SSR), which is determined by various risk-related factors. The yield itself comes primarily from interest paid on existing USDS loans, and the current SSR is 3.75%.

stUSDS is a higher-risk, higher-reward option to earn yield on USDS. 

Unlike sUSDS, it’s backed by staked SKY tokens. So, if there’s a sharp drop in the price of SKY and the collateral value can’t cover the stUSDS debt, holders may not be able to recover their funds. stUSDS holders are currently earning 5.58% APY.

Right now, there are ~6.8B sUSDS earning yield, compared to just 198M stUSDS. While the extra risk might play a part in this difference, it’s largely due to the fact that stUSDS deposits are limited to just a fraction of the current value of staked SKY tokens (currently worth ~$1.1B).

If Sky is the First Bank of Ethereum, Spark is its first set of branches.

Launched in 2023, Spark was the first app to bring Sky beyond the Ethereum L1 network, allowing more DeFi users to earn yield on their USDS.

While the Sky platform still solely runs on Ethereum, Spark has deployed vaults on networks such as Base and Arbitrum. These vaults make it possible to earn the same yield across networks, so USDS deposits from any Spark-enabled chain always earn Ethereum’s SSR.

Earlier this week, Spark’s savings vaults – which include USDS as well as other major stablecoins – crossed the $4B mark for the first time.

Keel is the gateway for USDS to enter new onchain ecosystems, starting with Solana, by providing liquidity and incentives such as boosted yields (e.g. if the current APY is 4%, Keel adds extra USDS to make it 6%). So far, they’ve partnered with major Solana apps including Kamino (Solana’s top lending/yield app) and Drift (Solana’s top derivatives market).

So far, Keel has worked in the background to create cross-chain infrastructure for USDS. However, there are plans to launch their own DeFi app in the future, which may include features such as cross-chain USDS transfers, credit markets, and more.

Grove brings value to USDS by sourcing attractive yields and new opportunities from institutional finance, such as:

By doing so, USDS holders can benefit from higher yields, and credit markets benefit from DeFi-sourced financing.

Obex serves as the recruiter for future Sky Agents, and their main goal is to essentially bring as many new Agents into the Sky Ecosystem as possible. 

By serving as a dedicated incubator that’s directly connected to Sky, Obex makes it easier for future Agents to integrate into the ecosystem. 

Sky has committed to fund Obex-incubated projects with $2.5B, adding major incentives to become a new Agent.

A large portion of that was recently used to partner with the fintech mortgage/home equity firm Better, which has funded over $110B in loan volume to-date. This brings new income streams to USDS’ yield in the form of mortgages, HELOCs, proceeds of loan sales, and more.

Will integrate the fintech mortgage/home equity company Better, which recently partnered with Sky to bring $500M of USDS into their platform.