USDS (USDS) is the dollar-pegged stablecoin issued by Sky Protocol, the entity formerly known as MakerDAO. In 2024, Maker's "Endgame" restructuring renamed the protocol Sky, its MKR governance token became SKY, and its flagship stablecoin DAI became USDS - a 1:1 upgraded version that most DAI holders were encouraged to migrate into.
How USDS works
USDS keeps DAI's core idea - a decentralised, over-collateralised dollar token - but broadens the collateral base further into real-world assets, including short-term U.S. Treasuries, alongside crypto collateral like ETH and USDC. Holders can lock USDS into the Sky Savings Rate, the successor to the old DAI Savings Rate, to earn yield funded by protocol revenue from those collateral positions. Governance sits with SKY token holders, who vote on collateral types, risk parameters, and the increasingly RWA-heavy direction of the protocol's balance sheet.
The rebrand wasn't universally welcomed. A vocal slice of the Maker community objected to abandoning the DAI brand and to Sky's growing reliance on centralised, custodied real-world assets - a trade-off between yield and the decentralisation that made DAI's model distinctive in the first place.
Risks worth knowing
USDS inherits DAI's dependency on well-managed collateral, but leaning further into RWAs introduces counterparty and custody risk that a purely crypto-collateralised stablecoin doesn't carry - if a treasury custodian or RWA partner stumbles, the peg absorbs that shock. Migration from DAI to USDS has also caused confusion, with two similar tokens circulating and differing incentives to switch. And because Sky's governance concentrates significant power in SKY holders and the core team, the protocol's direction can shift faster than some users expect.
For traders and DeFi users, USDS functions much like DAI always did - just with a new name, a bigger real-world asset footprint, and a governance structure still finding its footing post-rebrand.