MakerDAO / Sky: The Decentralized Stablecoin Protocol
Learn how MakerDAO created DAI, the world's most battle-tested decentralized stablecoin, and how the Sky upgrade is introducing a new era of yield-bearing stability and governance.
What is MakerDAO / Sky?
MakerDAO created DAI, the first and most battle-tested decentralized stablecoin. Since 2015, DAI has maintained its $1 peg without a central authority holding cash reserves. Instead, it's backed by diversified crypto collateral (ETH, WBTC, staking tokens, real-world assets) and algorithmic incentives.
In 2026, MakerDAO rebranded to Sky, introducing a major upgrade. The new $SKY governance token works alongside $MKR. The protocol now features the DAI Savings Rate (DSR) at 5%, allowing anyone to deposit DAI and earn yield without locking it up or taking smart contract risk.
Sky's mission is to enable a world where anyone can access stable money and earn savings returns. With $5.2B DAI in circulation, it's become essential infrastructure for trading, lending, and building on Ethereum.
How MakerDAO / Sky Works
Deposit Collateral
Users lock crypto collateral (ETH, WBTC, USDC, real-world assets) into a Vault. Each collateral type has a minimum collateralization ratio (e.g., 150% for ETH).
Mint DAI Stablecoin
Based on collateral value, users can mint DAI up to their LTV limit. Each DAI is algorithmically worth $1 and backed by the collateral pool.
Pay Stability Fees
Users pay a stability fee (interest rate) on minted DAI. This fee incentivizes burning DAI, which removes it from circulation and helps maintain the $1 peg.
Earn DSR Yield
Hold DAI in the protocol and earn the DAI Savings Rate (currently 5% APY). It's like a savings account—just keep DAI in your wallet connected to Sky.
How to Use Sky / MakerDAO
Connect Your Wallet
Go to app.sky.money and connect your MetaMask, Ledger, or Trezor wallet. Make sure you have ETH for gas fees.
Deposit Collateral
Navigate to 'Vaults' and deposit ETH, WBTC, staking tokens, or other approved collateral. Your collateral is locked in the smart contract.
Mint DAI
Based on your collateral value and the collateral ratio, mint DAI up to your limit. You'll see your stability fee rate (varies by collateral type).
Use or Save DAI
Use minted DAI for trading, lending, or hold it. Or deposit DAI into the DSR (Savings Rate) to earn 5% yield automatically.
Repay & Close Vault
Anytime, return your DAI + fees to unlock your collateral. You're in full control—no lockup period.
Key Risks to Understand
- Collateral Price Risk: If your collateral drops sharply, you could face liquidation. If ETH crashes 40%, your vault may be liquidated and collateral sold at loss.
- Stability Fee Risk: If governance votes to raise stability fees, your borrowing cost increases. Watch governance proposals.
- Smart Contract Risk: Sky is battle-tested over years, but smart contract bugs are always possible. Audits don't guarantee safety.
- DSR Yields: DSR yields (currently 5%) depend on system income. If stability fees drop, DSR may decrease. It's not a guaranteed rate.
- Slippage on Liquidation: In volatile markets, liquidations may execute at worse-than-expected prices due to MEV and network congestion.
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