Authors: Tim Craig & Sheldon Reback, CoinDesk contributors
Compiled by: Rhythm Xiao deep
Editor’s Note: The DeFi savings protocol Sky (formerly MakerDAO) reported a loss of $5 million in the first quarter of 2025, in stark contrast to a profit of $31 million in the previous quarter. The loss was primarily due to incentives to use the new stablecoin USDS instead of DAI, leading to a 102% surge in interest payments. Despite USDS's aim to attract sophisticated investors, its user base growth remains unclear, and the protocol's profitability is hindered by high interest rates.
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TL;DR
· DeFi savings protocol Sky (formerly MakerDAO) reported a loss of $5 million in the first quarter, a significant drop from a profit of $31 million in the previous quarter.
· To incentivize users to use the new stablecoin USDS instead of DAI, the protocol increased interest payments to savers by 102%.
· Despite launching USDS to attract sophisticated investors, it remains unclear whether it significantly expanded Sky's user base.
Sky co-founder Rune Christensen (original image provided by Trevor Jones)
According to a report from Sky contributor Steakhouse Financial, the DeFi savings protocol Sky lost $5 million in the first quarter, primarily due to more than doubling interest payments to token holders.
This loss stands in stark contrast to the previous quarter, when Sky recorded a profit of $31 million. The 102% increase in interest payments is attributed to the protocol's decision to incentivize users to use the newer Sky dollar stablecoin (USDS) instead of the existing DAI.
"Sky's savings rate remains at 12.5%, which is very high compared to other parts of the market, attracting a large inflow of funds," Sky co-founder Rune Christensen told CoinDesk via Telegram. He noted that many investors chose to stay even when Sky reduced the interest rate to 4.5% in February.
This situation is a double-edged sword for the protocol, which is one of the first decentralized finance applications that emerged on Ethereum in 2017.
Sky operates similarly to a traditional bank. It needs to lend to others at a higher rate than it pays to savers.
However, providing higher interest rates without corresponding increases in USDS demand is harming the protocol's profitability, GFX Labs governance contact PaperImperium told CoinDesk via Telegram.
"USDS is a significant drag on earnings," he said. "DAI makes money, while USDS does not."
Pushing USDS is part of Sky's so-called 'endgame plan,' led by Christensen, aimed at transforming the protocol into a more decentralized and resilient system.
No new demand?
When Sky rebranded from MakerDAO and launched USDS in August as part of the endgame plan, the plan was for the new stablecoin to attract a different user base than DAI.
USDS is designed to be more compliant with regulatory and financial reporting requirements, targeting hedge funds, family offices, and other sophisticated institutional investors looking to enter decentralized finance.
However, it remains unclear whether USDS has attracted a large number of new users.
The returns available to investors differ between USDS and DAI: USDS pays a yield of 4.5%, while DAI offers 2.75%.
Many investors converted DAI to USDS, meaning Sky needs to pay more to those who were previously satisfied with lower yields or even no yields, PaperImperium said.
The report states that since the beginning of this quarter, the total amount of USDS and DAI has increased by 57%. However, a significant portion of this growth comes from the synthetic dollar protocol Ethena, which injected over $450 million into staked USDS and passed the returns to users staking its own stablecoin USDe.
In the past week, Ethena has shifted part of its reserves from USDS to USDtb—a stablecoin supported by BlackRock's dollar institutional digital liquidity fund (BUIDL).
This move means a reduction in the circulating USDS. However, it may also benefit Sky by reducing the amount of interest the protocol must pay.
