Sky (formerly MakerDAO) reports 5MQ1lossduetounsustainable12.55MQ1lossduetounsustainable12.531M profit.
The high-interest strategy for USDS adoption backfired, increasing costs without expanding user base as DAI holders simply converted to higher-yield USDS.
Sky’s Endgame initiative faces challenges balancing growth incentives with financial sustainability in competitive stablecoin market dominated by USDT and USDC.
In the world of decentralized finance (DeFi), Sky (formerly MakerDAO) has long been a leader in the stablecoin space, with its flagship token DAI widely regarded for its decentralization and reliability.
However, the project’s Q1 2025 financial report sounded the alarm: Sky posted a $5 million loss—an abrupt reversal from the $31 million profit recorded in the previous quarter.
According to Steakhouse Financial, the loss was driven by a 102% surge in interest payments to token holders, tied directly to Sky’s push to replace DAI with its new stablecoin, Sky Dollar (USDS).
ROOT CAUSE: HIGH INTEREST STRATEGY BACKFIRES
Sky’s financial setback in early 2025 can be traced to one major issue: an unsustainable increase in interest expenses. To promote adoption of USDS, Sky introduced aggressive incentives, offering a savings rate of up to 12.5%—far above industry norms.
This strategy attracted significant capital inflow, but also sharply raised operating costs, especially as demand for USDS failed to keep pace.
As noted by PaperImperium, a governance liaison at GFX Labs, this approach hurt profitability. “DAI was profitable.
USDS, not so much,” he remarked. In comparison, Sky’s strong Q4 2024 performance was driven by DAI’s broad adoption and lower operational expenses. The drastic swing from profit to loss underscores the financial risks of high-yield incentives.
In February 2025, Sky reduced the USDS savings rate to 4.5%. However, many users continued to hold high-yield positions, compounding the interest burden and limiting the immediate impact of the rate cut.
USDS AND THE ENDGAME VISION
The introduction of USDS is part of Sky’s broader “Endgame” initiative—a plan led by co-founder Rune Christensen aimed at making the protocol more decentralized, resilient, and institution-friendly.
Launched in August 2024, USDS was designed as an upgraded, compliant alternative to DAI, targeting sophisticated investors such as hedge funds and family offices.
With a higher yield (4.5% vs. DAI’s 2.75%), USDS aimed to incentivize migration. However, the new product struggled to attract fresh capital.
According to PaperImperium, many existing DAI holders simply converted to USDS, meaning Sky had to start paying higher returns to users who previously accepted low or zero yields. This internal shift drove up costs without expanding the user base.
Sky’s model resembles that of traditional banks: it relies on earning more from lending than it pays in interest. But with demand for USDS still weak, the high-yield strategy has strained the protocol’s financial health.
AT A CROSSROADS
Despite the challenges, USDS still represents an opportunity for Sky. If the stablecoin can deliver on its promises of compliance, efficiency, and institutional adoption, it may help the protocol maintain its leadership in DeFi.
The Endgame vision—with its emphasis on decentralization and brand transformation—could draw new capital and enable long-term growth.
Still, hurdles remain. High incentive costs continue to weigh on finances, and the shift from DAI to USDS hasn’t significantly grown Sky’s user base, suggesting strong community inertia and switching frictions.
In a competitive stablecoin market, USDS must contend with USDT’s massive circulation and USDC’s institutional backing.
Most critically, Sky must find a sustainable balance between user incentives and financial viability—or risk repeating this quarter’s losses.
LESSONS FOR THE DEFI INDUSTRY
Sky’s experience serves as a cautionary tale for the DeFi space. Many protocols rely on high incentives to bootstrap new products, but this approach can undermine long-term sustainability.
Projects like Aave and Compound must similarly weigh the trade-offs between innovation and profitability.
More broadly, Sky’s Q1 performance highlights the challenges of DeFi’s maturing phase. As competition intensifies, protocols need more than just technical innovation—they must also deliver strong branding, governance, and financial discipline.
The Endgame initiative is a bold experiment, and its outcome will likely shape how the next generation of DeFi evolves.
〈Sky’s Painful Transition: $5M Loss Highlights USDS Growing Pains〉這篇文章最早發佈於《CoinRank》。
