USDS is a decentralized stablecoin issued by the Sky Protocol, designed to maintain a 1:1 value with the U.S. dollar. It operates on multiple blockchains and can be minted through overcollateralized vaults using ETH, USDC, or tokenized real-world assets. ^[1][2]

Overview

USDS is an ERC-20 stablecoin developed for the Sky ecosystem. It incorporates features like permit functionality, EIP-1271 signature validation, and upgradeability through the UUPS proxy pattern. USDS can be exchanged 1:1 with DAI or converted from USDC via supported platforms, with optional access to protocol-native reward systems or a standard savings rate. However, these benefits are restricted in certain jurisdictions, including the US and the UK. 

USDS is minted through Sky Vaults, where users deposit assets such as ETH, USDC, or tokenized real-world holdings as collateral. The system ensures each USDS is backed and uses liquidation mechanisms to manage risk. Users can allocate USDS to earn returns through the Sky Savings Rate or receive distributions via Sky Token Rewards, offering additional utility beyond price stability. ^{[3] [6] [7]}

History

USDS is a rebranded version of the stablecoin Dai (DAI), introduced by Sky, formerly Maker, following the protocol's rebrand in August. The transition included confusion over the name change, and although there was a proposal to revert to “Maker,” major stakeholders ultimately rejected it.

In November, Sky launched USDS on the Solana blockchain, positioning it as the first major DeFi-native stablecoin on that network. The deployment is part of a broader plan to expand Solana’s decentralized finance ecosystem, including future integration with a planned cross-chain bridge, SkyLink, for USDS and its savings variant, sUSDS, pending governance approval.

Sky introduced reward programs for early users and liquidity providers across protocols such as Kamino Finance, Drift Protocol, and Save Finance to encourage adoption on Solana. These incentives are distributed in USDS and aim to grow liquidity and participation. The protocol uses Wormhole’s Native Token Transfer system to support seamless USDS activity on Solana. ^[8]

sUSDS

sUSDS is a token representing deposits into the Sky Protocol Sky Savings Rate (SSR) module, enabling users to earn yield on their USDS holdings. It is built on the ERC-4626 standard, allowing for accurate and real-time conversion between USDS and sUSDS values. When users deposit USDS into the SSR module, they receive sUSDS tokens, which track the amount deposited and any value accrued over time.

The Sky Protocol regularly adds USDS to the SSR pool, based on a variable savings rate determined through on-chain governance. As the protocol adds these tokens, the value of sUSDS increases proportionally, allowing users to redeem their sUSDS at any time for USDS, including their initial deposit and any earned returns. The token architecture includes upgradeable features via the ERC-1822 UUPS pattern and ERC-1967 storage proxy, providing flexibility for future system updates. Smart contracts handle all value changes and conversions without any fees or intermediaries. ^{[9] [10]}

Utility

USDS provides multiple forms of utility by allowing holders to earn rewards through decentralized, non-custodial mechanisms integrated into the Sky Protocol. Users can allocate USDS to the Sky Token Rewards (STRs) system, which distributes SKY token incentives proportionally based on a user’s share of the total USDS pool in the module. The amount of SKY tokens a participant receives depends on how much USDS they’ve contributed relative to others, not on an absolute basis. This share may shift as the overall pool size fluctuates. These rewards are managed through smart contracts, not intermediaries, meaning users retain full control over their funds.

Alternatively, users can supply USDS to the Sky Savings Rate (SSR) module. Upon doing so, they receive sUSDS, a tokenized representation of their deposit that complies with the ERC-4626 standard. As the protocol regularly adds USDS to the SSR pool to reflect earned savings, the value of sUSDS increases over time. Users can redeem sUSDS for USDS at any time, receiving their initial deposit and accrued rewards. This savings mechanism operates without requiring a minimum supply, and value accrual happens continuously based on the protocol’s internal rate logic.

STR and SSR give USDS holders access to ongoing rewards while maintaining liquidity and self-custody, expanding the coin's function beyond a typical stablecoin. ^{[10] [11]}