# Savings DAI (sDAI)

> sDAI was an ERC-4626 token representing DAI in the DSR, letting users earn yield while maintaining liquidity for DeFi transfers, staking, and lending, as an acc...

- Canonical URL: https://iq.wiki/wiki/savings-dai-sdai
- Categories: Cryptoassets
- Tags: Infrastructure
- Created: 2025-07-21T12:41:43.273Z
- Last updated: 2025-07-24T11:36:51.814Z
- Source: IQ.wiki — the world's largest blockchain and crypto encyclopedia (https://iq.wiki)

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**Savings DAI (sDAI)** is an [ERC-4626](https://iq.wiki/wiki/erc-4626) token that represents [DAI](https://iq.wiki/wiki/dai) deposited in the [Dai](https://iq.wiki/wiki/dai) Savings Rate (DSR) module, enabling users to earn yield from the Sky Protocol while retaining the ability to use sDAI for transfers, [staking](https://iq.wiki/wiki/staking), lending, and other [decentralized finance (DeFi)](https://iq.wiki/wiki/defi) functions. [\[1\]](#cite-id-XKKxJdY9hq)

## Overview

Savings [DAI](https://iq.wiki/wiki/dai) (sDAI) served as an earlier iteration of Savings [USDS](https://iq.wiki/wiki/usds) (sUSDS), functioning as a tokenized representation of [DAI](https://iq.wiki/wiki/dai) [stablecoins](https://iq.wiki/wiki/stablecoin) that were deposited into the [Dai](https://iq.wiki/wiki/dai) Savings Rate (DSR) within the Sky Protocol. This design allowed sDAI holders to accrue yield generated by the DSR while maintaining the flexibility to utilize the token across various [DeFi](https://iq.wiki/wiki/defi) applications. Unlike rebasing tokens, sDAI is an accumulating token, meaning its [DAI](https://iq.wiki/wiki/dai)-denominated value gradually increases over time. Each sDAI token is fungible and can be instantly redeemed for [DAI](https://iq.wiki/wiki/dai). [\[1\]](#cite-id-XKKxJdY9hq)

The yield for sDAI is derived directly from the [Dai](https://iq.wiki/wiki/dai) Savings Rate (DSR), a feature of the [Sky Protocol](https://iq.wiki/wiki/skymoney) that allows any [DAI](https://iq.wiki/wiki/dai) holder to earn a savings rate on their holdings. To activate this yield, users must deposit their [DAI](https://iq.wiki/wiki/dai) into the DSR smart contract. The deposited [DAI](https://iq.wiki/wiki/dai) remains unlocked and can be withdrawn instantly at any time. The DSR is funded by the [Sky Protocol's](https://iq.wiki/wiki/sky) revenue streams, which include fees from crypto-collateralized loans, investments in U.S. treasury bills, and liquidity provisioning into SparkLend and the [Spark](https://iq.wiki/wiki/spark) Liquidity Layer. [\[1\]](#cite-id-XKKxJdY9hq)

Both Savings [DAI](https://iq.wiki/wiki/dai) and the [Dai](https://iq.wiki/wiki/dai) Savings Rate are non-custodial and permissionless [smart contracts](https://iq.wiki/wiki/smart-contract) provided by [Sky](https://iq.wiki/wiki/skymoney), and are not issued or deployed by [Spark](https://iq.wiki/wiki/spark). [Spark](https://iq.wiki/wiki/spark) does not exert any control over the Sky Savings Rate or the sDAI token, as Sky Governance determines the DSR rate and is subject to change. [\[1\]](#cite-id-XKKxJdY9hq)

## Yield Generation

The core functionality of sDAI revolves around its connection to the [Dai](https://iq.wiki/wiki/dai) Savings Rate (DSR). When [DAI](https://iq.wiki/wiki/dai) is deposited into the DSR contract, it begins to accrue yield, which is paid out in [DAI](https://iq.wiki/wiki/dai). The sDAI token then represents this yield-bearing [DAI](https://iq.wiki/wiki/dai). As an accumulating token, the value of sDAI in terms of [DAI](https://iq.wiki/wiki/dai) increases over time, reflecting the yield earned. This contrasts with rebasing tokens, where the token balance itself might change. [\[1\]](#cite-id-XKKxJdY9hq)

Users can acquire Savings Tokens, including sDAI, by depositing supported stablecoins into a Savings Vault through the [Spark](https://iq.wiki/wiki/spark) App. The [Spark](https://iq.wiki/wiki/spark) App provides a user-friendly interface for managing deposits and accessing the [Sky](https://iq.wiki/wiki/skymoney) Savings Rate, offering a transparent [Annual Percentage Yield (APY)](https://iq.wiki/wiki/annual-percentage-yield-apy) in [USDC](https://iq.wiki/wiki/usdc).  [\[1\]](#cite-id-XKKxJdY9hq) [\[2\]](#cite-id-d397aAPzRX)

## Sky Protocol

The [Dai](https://iq.wiki/wiki/dai) Savings Rate (DSR) and the sDAI token are integral components of the [Sky Protocol](https://iq.wiki/wiki/skymoney). These are non-custodial and permissionless [smart contracts](https://iq.wiki/wiki/smart-contract) that are offered by [Sky](https://iq.wiki/wiki/skymoney), rather than being issued or deployed by [Spark](https://iq.wiki/wiki/spark). This distinction is crucial as [Spark](https://iq.wiki/wiki/spark) does not have any direct control over the [Sky](https://iq.wiki/wiki/skymoney) Savings Rate or the sDAI token. The governance of the Dai Savings Rate, including its yield percentage, is managed by [Sky](https://iq.wiki/wiki/skymoney) Governance. [\[1\]](#cite-id-XKKxJdY9hq)

The DSR's yield is generated from various revenue sources within the Sky Protocol, including fees collected from crypto-collateralized loans, returns from investments in U.S. Treasury bills, and income from providing liquidity to SparkLend and the [Spark](https://iq.wiki/wiki/spark) Liquidity Layer. This diversified revenue model contributes to the sustainability of the DSR. [\[1\]](#cite-id-XKKxJdY9hq)