MakerDAO to Sky: DAI, USDS, MKR and SKY Explained

MakerDAO rebranded to the Sky Ecosystem in 2024, and the Maker Protocol evolved into Sky Protocol. DAI and MKR still exist, but the current ecosystem centers on the upgraded stablecoin USDS and governance token SKY. The 2020 article below predates this transition and several major changes to collateral, governance and savings.

Maker and Sky status in 2026

Original 2020 statement	Current status
MKR is the Maker governance token	Historical; SKY has been voted the sole Sky Protocol governance token
MKR is required to pay stability fees	Outdated; debt and fees are handled through the protocol’s stablecoin accounting, not by requiring every borrower to buy MKR
MKR burns after each transaction	Incorrect; protocol buyback/burn or treasury mechanics are governance-controlled and not triggered by every user transaction
A CDP needs more than 140% collateral	No universal ratio; each Vault type has governance-set debt ceilings, fees, liquidation ratios and other risk parameters
DAI is backed only by deposited ETH	Long outdated; the system has supported multiple crypto, stablecoin and real-world-asset-related exposures
Borrowing DAI avoids capital-gains tax	Not reliable advice; borrowing, liquidation and later asset disposals can have jurisdiction-specific tax consequences

How DAI and USDS are created

Users can generate protocol stablecoin debt through overcollateralized Vaults that accept approved collateral. If a position falls below its required collateralization, the protocol can liquidate collateral. Stability fees accrue on debt, and every collateral type has its own parameters. There is no single safe ratio or fixed borrowing cost.

Peg Stability Modules can exchange approved stablecoins with DAI or USDS under governance-set rules and fees. This supports the peg but creates exposure to centrally issued stablecoins, custodians, regulation and depegs. The protocol’s collateral base also includes allocations connected to real-world assets and external DeFi strategies, so “decentralized stablecoin” is not a complete risk description.

USDS is Sky Protocol’s upgraded stablecoin. Sky says USDS itself does not generate yield; users who choose to supply it to the savings system receive sUSDS, an ERC-4626 token whose redemption value accrues according to the governance-set Sky Savings Rate. Savings yield is variable and introduces protocol, governance and collateral risks.

MKR to SKY upgrade

The published base upgrade rate is 1 MKR to 24,000 SKY, but a delayed-upgrade penalty began in September 2025 and increases over time under governance rules. The upgrade is irreversible through Sky Protocol, and the applicable amount should be checked in the official interface immediately before signing.

SKY can be used for direct or delegated governance and the Sky Staking Engine. Governance participation and staking are not risk-free: smart-contract, voting, slashing or liquidation-style position risks may apply depending on the feature used. Never approve a converter found through an advertisement or unsolicited message.

Original July 2020 Maker and DAI guide (historical archive)

The original author-written sections below are preserved substantially intact. Its CDP terminology, ETH-only framing, MKR fee/burn descriptions, exchange list and tax claims reflect 2020. One injected gambling link and a Binance referral parameter were removed.

Before DeFi was even a thing, Maker was already popular. With the rise of decentralized finance applications (DeFi), the cryptocurrency space has seen a drastic growth in a short span of time and Maker is the primary pioneer of DeFi applications. Meanwhile, the world of cryptocurrency is dynamic, and every moment sees new use cases emerging for different purposes. The high volatility of cryptocurrency has also posed different challenges for users and crypto investors, leading to the creation of stablecoins which can hopefully ‘stabilize’ the volatility.

What is Maker?

MakerDAO is a Decentralized Autonomous Organization (DAO) founded by Rune Christensen in 2014. Maker ($MKR) serves as its governance token and is powered by the Ethereum blockchain.

The Maker ecosystem utilizes smart contracts to execute transactions in the protocol. Additionally, it uses the fractional reserve banking approach to ensure that its stablecoin ($DAI) remains stable.

As an ERC-20 token, MRK is not mined. Its holders are given voting rights to the collateralization on the platform. As governments who have a stake in the protocol, they are incentivized to vote on changes that could benefit the Maker ecosystem. After all, poor governance would lead to the devaluation of MKR.

The Collateralized Debt Position (CDP) makes the provision for liquidity possible when dealing with crypto assets. The idea is to provide crypto investors and traders with a decentralized platform that is suitable for margin trading. Some unique things about the Maker platform include lower prices compared to other margin trading platforms, flexibility, and improved security.

What is the difference between $MKR and $DAI?

Maker ($MKR) was created to function as a utility token for a blockchain-based platform for P2P transfers and international payments. To avoid the volatility of the crypto market, a stablecoin called “DAI” was created and connected to Maker.

Collateralized Debt Position (CDP) and its uses

The value is based on the ability of the investor or trader to get liquidity without giving out their ETH tokens. It is important to protect the DAI from loss of value by depositing more than 140% of the DAI coins.

MKR tokens are needed to perform the transactions with the aid of smart contracts. When the CPD gets closed, or if there is a repayment of the DAI, the stability fee gets paid as MKR.

Furthermore, after each transaction MKR gets burned. Which invariably means that the circulating supply of MKR tokens will reduce over time. An increase in MKR’s popularity will increase the demand and number of burned MKR tokens, and result in a price increase.

Uses of MKR

The MKR network has four major use cases, including usages by the participants within the network. It is important to note that MKR and DAI are the two tokens used within the Maker ecosystem. Here are the four major uses:

Traders can utilize MKR as leverage for the ETH they own

Crypto investors and traders can use MKR if they think that the price of ETH at that moment is undervalued. While anticipating the coin’s rise, they make some ETH deposits with MKR, have a CDP, and get DAI in return.

They can make other ETH trades with DAI. When the ETH they own is leveraged, it is kept locked-up to get more ETH and make profits from the increase in price.

A liquidity creation tool that helps avoid capital gains tax

Some crypto users may be subject to capital gains tax on their earnings from cryptocurrency trades and investments. Crypto traders that have made a fortune need to secure their profits from the high volatility of digital currencies like ETH.

MKR provides an effective solution through ETH deposited for DAI which is pegged with the exchange rate of the US dollar. The benefit is that you avoid paying tax because your money is available in a profitable and stable cryptocurrency.

A cheap way to facilitate the repayment of costly fiat loans, with crypto loans

A crypto trader or investor can deposit their ETH in order to get loans at favorable rates. This helps them boycott the expensive loan fees and interest rates of traditional banks.

For crypto investors without CDP

Another use case of the MKR token is by crypto investors who are interested in the token. However, their interest in the token does not involve creating a CDP; rather they own the tokens to sell later.

MKR tokens are created to promote financial freedom while eliminating volatility.

Markets that can benefit from MKR

MKR comes with some flexibility that makes it perfect for some markets, and these markets include:

Financial Markets

The introduction of smart contracts to facilitate the operations of derivatives and options helps collateralized stable prices. Decentralized trading tools are provided at zero interest rates, and are facilitated by the implementation of CDPs by MKR.

Transparent Auditing Frameworks

By default, the underlying blockchain technology promotes transparency. However, MKR’s platform takes transparency further with verifiable transactions. Organizations are provided with a framework that helps improve efficiency in their auditing and accounting operations. The transparency in the system mitigates corruption.

International Trade

One irregularity with performing international transactions is the high cost, which can be attributed to the presence of intermediaries. With MKR and DAI, intermediaries are taken off the equation in exchange for seamless person to person international transactions at reduced costs.

Gambling Markets

The volatility of the crypto market does not make long-term betting with crypto an advisable venture to try. The underlying risks involved include a drop in the rate and price of crypto assets.

Where to buy MKR

As opposed to some years ago when MKR was not available on popular exchanges, it is pretty much available almost everywhere. You can buy from Changelly, ShapeShift, OKEx, Nova Exchange, HitBTC, Binance, CoinBase Pro, BiBox, MXC, etc.

Getting signed up to start trading is easy and straightforward too.

Check out our reviews for Binance and Coinbase exchanges. If you do use Coinbase, you might want to also check out our tips and hacks for avoiding Coinbase fees.

Conclusion

Cryptocurrency is on the path to mass adoption, and unique blockchain-based platforms like Maker are strategically positioned for it. With more use cases of cryptocurrency and blockchain technology emerging, owners of the MKR token are likely to enjoy more profitability.

Maker MKR has the right framework and underlying technology to tackle the issue of high volatility within the crypto market. In comparison to regular cryptocurrency, MKR poses fewer risks because of its stability mechanism.

Decentralised Finance (DeFi) series: tutorials, guides and more

With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces

The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

Tutorials and guides for the ESSENTIAL DEFI TOOLS:

More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!

Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

Frequently asked questions

Did MakerDAO become Sky?

Yes. Maker rebranded to the Sky Ecosystem in 2024, and the protocol now emphasizes USDS and SKY while legacy DAI and MKR remain relevant to the transition.

What is the difference between DAI and USDS?

USDS is described by Sky as the upgraded version of DAI. They are separate tokens, so users must verify which one an application or network supports.

Is DAI still active?

Yes. DAI has not simply disappeared, although Sky's current ecosystem encourages an upgrade path to USDS and some integrations may migrate over time.

What is the difference between MKR and SKY?

SKY is the current governance token of Sky Protocol. MKR holders can use the official converter to receive SKY at the published rate minus any applicable delayed-upgrade penalty.

What is the MKR-to-SKY conversion rate?

The base rate is 24,000 SKY per MKR, but a time-based penalty has applied since September 2025. Check the official interface for the current received amount.

Can SKY be converted back to MKR?

Not through the Sky Protocol converter. Official upgrade materials describe the MKR-to-SKY conversion as irreversible.

How are DAI or USDS generated?

Approved collateral can be deposited into overcollateralized Vaults to generate stablecoin debt under governance-set fees and liquidation parameters.

Can a Sky Vault be liquidated?

Yes. If collateral value breaches the Vault's liquidation requirements, collateral can be sold and penalties may apply.

Does USDS automatically earn yield?

No. Sky states that USDS itself does not generate yield. Supplying it to the savings system produces sUSDS, whose value accrues at a variable governance-set rate.

Is DAI or USDS risk-free?

No. Risks include collateral depegs, liquidation shortfalls, smart-contract or oracle failures, governance actions, real-world asset exposure and market liquidity.