Sky Lending Protocol & USDS Stablecoin: Your DeFi Income Rocket?
Discover how Sky’s revamped lending protocol and USDS stablecoin (formerly DAI) work together to generate passive yield step-by-step, with real examples and actionable guidance.
Introduction
Welcome! In this article, we’ll dive deep into Sky Lending Protocol and its USDS stablecoin, exploring how they blend the legacy of MakerDAO with new innovations to help you earn reliably in DeFi.
We’ll show you exactly how it works, the benefits, the risks, and a practical roadmap to start earning, no jargon, just clear steps.
Origins: From MakerDAO to Sky
Formerly MakerDAO, the longest-standing decentralized lending platform, Sky rebranded in August 2024. Alongside this, DAI evolved into USDS, and the governance token MKR transformed into SKY, with a conversion rate of 1 MKR → 24 000 SKY .
This rebrand aims to simplify access, enhance token utility, and usher in a new era of DeFi innovation. While some in the community debated reverting, Sky’s architecture, including “Sky Stars” subDAOs like Spark remains robust .
What is USDS & How Does It Work?
USDS is a 1:1 USD-backed decentralized stablecoin, inheriting DAI’s reliability but with new features.
Key differences:
It includes a savings version called sUSDS, earning automatically through protocol revenue distribution.
It supports a freeze mechanism (on purpose but DAI remains censorship-resistant) .
The protocol manages borrowing/collateral through collateralized debt positions (CDPs), similar to MakerDAO.
How Sky Lending Protocol Earns and Rewards Users
Revenue Streams:
Borrowers pay interest on USDS loans.
Sky reported $22 million in December 2024, with daily fees peaking at $1.3 million and USDS/DAI supply near $6.2 billion .
Total Value Locked (TVL) is ~$5 billion on Ethereum .
Savings Rate (SSR):
Governance currently set SSR at 8.75% APR (Feb 2025), down from 12.5% due to market shifts .
Incentives:
Incentive plans include rewards via integration with Aave v3 and USDS markets, earning SPK tokens and boosted APY .
Real-World Adoption & Integration
Solana Expansion:
USDS launched as the first major DeFi-native stablecoin on Solana in Nov 2024. It’s integrated into Kamino Finance, Drift Protocol, Save Finance and rewards early users (300K–500K USDS/week) .
Cross-Chain Connectivity:
Using Wormhole’s Native Token Transfer, SkyLink enables cross-chain use of USDS and SKY across Solana, Ethereum, and Base .
DeFi Partnerships:
Collaborations with Aave include integrating USDS/sUSDS and launching a D3M module with $100 million debt ceiling on Aave v3 Lido pool .
Step-by-Step Guide: How to Earn with Sky Lending
Acquire USDS/sUSDS
Swap ETH, USDC, or other stablecoins on DEXes to USDS; consider bridging to Solana if needed.
Deposit into Savings Vault
Stake USDS on Sky or via partner platforms to earn SSR (~8.75% APR).
Portal on Aave v3
Use sUSDS as collateral to borrow or deposit USDS in Aave markets earn both yield and SPK token rewards.
Provide Liquidity on Solana
Supply USDS (e.g., USDC/USDS pairs on Kamino Finance) to earn trading fees + protocol incentives.
Compound & Reinvest
Claim SPK rewards, convert to USDS, and redeploy to compound earnings.
Benefits, Risks & Real-World Applications
Benefits
Steady yield (~8–10% APR) without active trading.
Multi-chain access: Ethereum, Solana, Base, Aave.
Strong DeFi integrations with established platforms like Aave and Kamino.
Diversified collateral: ETH, BTC, tokenized Treasuries .
Risks
Smart contract vulnerabilities (audit coverage is good, but not infallible).
Peg stability: severe market moves may impact peg maintenance.
Protocol governance risk: freeze function on USDS may concern some users.
Incentive dependency: reward drops could decrease yield.
Use Cases
Crypto farmers seeking yield without selling assets.
Cross-chain users taking advantage of multichain liquidity.
Institutional yield seekers eyeing blockchain-native stable income.
Key Takeaways
Sky is the natural evolution of MakerDAO, carrying forward DAI as USDS and MKR as SKY.
The Sky Lending Protocol offers ~8–10% APR through dual token strategies (USDS + sUSDS), partnerships (Aave, Solana), and incentive programs.
Real adoption: $5B TVL, $22M earned/month, USDS liquidity across 2+ chains with cross-chain rewards.
Risks remain contract integrity, governance model, market-driven peg pressures.
Future Outlook
Yield Evolution: SSR may adapt between 5–12% depending on market conditions.
Expanding Collateral: Tokenized real-world assets (T-bills) could deepen capital base .
Ecosystem Growth: USDS could scale to a top-3 stablecoin if Aave/Solana adoption continues.
Cross-Chain Bridges: SkyLink expansion to chains like Base boosts utility.
Regulation: Freezable features aim to balance decentralization with potential compliance.
Conclusion & Action Steps
Sky merges MakerDAO’s wisdom with vibrant multichain access. If you’re seeking yield without day-trading, here’s a clear path:
Explore app.xante.app
Go to yield compare - Stablecoins.
Clink on Sky Lending protocol
Get USDS/sUSDS on Ethereum or Solana.
Stake for SSR, bond with Aave integrations.
Add liquidity for boosted rewards.
Harvest SPK rewards & reinvest.
Ready to earn with Sky Lending? Start by converting a small amount of stablecoins into USDS, stake it and watch your passive income grow.
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This article is for educational purposes only and should not be considered financial advice. Always conduct your own research (DYOR) before making any investment decisions.