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What Is Sky?

Sky Protocol is a decentralized and permissionless financial infrastructure designed to support stablecoin transactions, governance, and decentralized finance (DeFi) services. Built as an evolution of MakerDAO, Sky Protocol introduces USDS, a new stablecoin, and SKY, an upgraded governance token, to enhance decentralization and scalability.

The protocol operates without intermediaries, allowing users to trade tokens, earn rewards, and participate in governance while maintaining full control over their assets. Sky Protocol is a non-custodial system, meaning users do not need to trust a third party to manage their funds.

Sky Protocol powers the Sky Ecosystem, which includes:

- USDS Stablecoin – A soft-pegged USD stablecoin backed by collateral.

- SKY Governance Token – A token for voting on protocol decisions.

- Sky Savings Rate (SSR) – A system that allows USDS holders to earn interest.

- Sky Token Rewards (STRs) – A rewards program for USDS stakers.

By leveraging smart contracts on Ethereum, Sky Protocol aims to create a transparent, decentralized financial system accessible to anyone.

How Sky Works

Sky Protocol functions as a stablecoin issuance and governance system, enabling users to generate, trade, and save stablecoins without centralized oversight. The ecosystem operates through a few key components:

1. Stablecoin System

- USDS is the core stablecoin of Sky Protocol, backed by collateralized assets and soft-pegged to the US dollar.

- Users can mint USDS by depositing accepted collateral assets into Sky Vaults, similar to how Dai was created in MakerDAO.

- USDS can be traded, staked, or held as a store of value.

2. Sky Vaults Collateralization

- Users generate USDS by locking collateral assets (such as ETH or tokenized real-world assets) in Sky Vaults.

- If the value of the collateral falls below a certain threshold, the protocol liquidates the position to ensure stability.

3. Sky Token Rewards (STRs) Sky Savings Rate (SSR)

- USDS holders can earn rewards by participating in the Sky Token Rewards program.

- The Sky Savings Rate (SSR) allows users to stake USDS and earn passive income.

- Unlike traditional banking, these rewards are distributed without intermediaries, relying on smart contracts to automate transactions.

4. Governance Decentralization

- Sky Protocol is governed by SKY token holders, who vote on risk parameters, collateral types, stability fees, and protocol upgrades.

- Decisions are made through a decentralized on-chain voting process, ensuring transparency and community control.

Sky Protocol integrates both crypto-native assets (ETH, USDT, USDC) and Real-World Assets (RWAs) as collateral, providing a bridge between DeFi and traditional finance.

What Is SKY Token?

The SKY token is the governance token of the Sky Protocol, replacing MakerDAO’s MKR token at a conversion rate of 1 MKR = 24,000 SKY. SKY allows holders to:

- Participate in Governance – Vote on protocol decisions, risk management, and feature upgrades.

- Trade for USDS Other Assets – SKY can be exchanged for USDS, ETH, or stablecoins in decentralized liquidity pools.

- Earn Rewards – SKY holders will soon be able to access Activation Token Rewards, offering additional benefits for governance participants.

SKY vs MKR: What’s Different?

- MKR was the governance token for MakerDAO, while SKY is the upgraded version for Sky Protocol.

- SKY tokens are designed to provide more decentralized control with expanded governance features.

- The rebrand reflects a move towards scalability, with independent subDAOs handling different parts of the ecosystem.

SKY tokens play a crucial role in the long-term sustainability of the protocol, incentivizing user participation while ensuring decentralized decision-making.

Sky Protocol vs. MakerDAO

Sky Protocol is essentially MakerDAO’s next evolution, addressing governance bottlenecks and expanding its financial ecosystem. While MakerDAO pioneered decentralized stablecoins with Dai (DAI) and a governance model centered on MKR holders, its decision-making process became slow and complex. Sky Protocol improves on this by introducing USDS (a revamped stablecoin) and SKY (a new governance token) while shifting governance to independent SubDAOs for faster, more efficient decision-making. It also moves beyond purely crypto-backed collateral by integrating tokenized real-world assets (RWAs) like real estate and bonds.

Conclusion

Sky Protocol takes what MakerDAO built and makes it faster, more scalable, and easier to govern. With USDS as the new stablecoin, SKY for governance, and real-world assets (RWAs) as collateral, it expands DeFi beyond just crypto. By introducing independent SubDAOs and AI-powered governance tools, Sky Protocol aims to keep things decentralized, efficient, and built for the future.