What is USDS?

USDS is Sky Protocol’s upgraded stablecoin — a rebrand and evolution of MakerDAO’s DAI launched in September 2024. It keeps DAI’s decentralized USD peg but adds cross-chain support via SkyLink, modular governance, and stronger integration with DeFi protocols. You could call it DAI 2.0 — same foundation, modernized mechanics. DAI holders could convert 1:1 or mint new USDS using supported stablecoins like USDC.

How does USDS maintain its USD peg?

The token stays pegged through a mint-and-burn model using the Peg Stability Module. Each USDS is backed 1:1 by stable assets like DAI or USDC. Supply expands when users mint with deposits and contracts when they redeem. No maximum cap — it’s purely demand-driven. The mechanism keeps its value hovering around $1 USD while ensuring full collateral backing and on-chain transparency.

What’s unique about USDS tokenomics?

Unlike most crypto tokens, USDS runs on an elastic supply model. Every token in circulation mirrors an equivalent reserve asset. Over 8 billion USDS exist, all fully backed. It also fuels Sky’s ecosystem buyback loop — over 79 million USDS have been used to repurchase SKY tokens, supporting long-term value balance between the stablecoin and its governance layer.

Are there any vesting or unlock schedules?

None. USDS isn’t subject to vesting since it’s minted and burned based on demand. Instead, value flows through the Sky Token Rewards (STR) system, distributing 600 million SKY per year to USDS holders. Rewards activate or pause anytime — no lock-ups, just opt-in yield that keeps the stablecoin dynamic yet flexible for users across DeFi.

Who are the key investors behind Sky Protocol?

Sky’s foundation rests on MakerDAO’s legacy funding — roughly $61.5 million raised between 2017–2020 from Andreessen Horowitz, Paradigm, Polychain, and Dragonfly. The rebrand to Sky didn’t add new investors; it drew on existing treasuries and fee revenue. With $75 million in USDS buybacks so far, Sky’s self-sustaining structure replaces outside capital with internal growth.

Where can users trade USDS?

USDS trades widely across major centralized and decentralized exchanges. Coinbase and Kraken list it against USD and USDT, while Uniswap and Raydium lead DeFi liquidity. SkyLink bridging extends trading to Arbitrum, Optimism, and Base — reducing gas fees and broadening reach. It’s one of the few stablecoins designed from birth for cross-chain liquidity.

Was there any ICO or airdrop for USDS?

No classic token sale occurred. Instead, DAI holders got a direct 1:1 upgrade in September 2024 — essentially a decentralized migration event. Ongoing reward programs now serve as the incentive layer: 600 million SKY yearly to USDS stakers and liquidity rewards through partner protocols like Kamino and Drift. It’s a slow-burn airdrop in spirit, not form.

What role does USDS play in Sky’s ecosystem?

It’s the base layer for everything Sky builds — lending, savings, credit markets, and yield protocols. USDS powers the Sky Savings Rate (around 4.75% APY) and anchors modules like Spark and Grove, which manage billions in DeFi and real-world assets. In essence, USDS is the settlement coin holding the Sky ecosystem together.

What risks should users keep in mind?

No stablecoin is risk-free. USDS faces smart contract vulnerabilities, oracle risks, and potential bridge exploits as it expands chains. Regulatory uncertainty adds another layer — the system could be required to activate freeze functions in certain jurisdictions. Still, Sky’s transparency, on-chain reserves, and governance oversight make it one of the sturdier decentralized USD options out there.