USDS usds
What is USDS?
USDS (Sky Dollar) is Sky Protocol's protocol-issued stablecoin designed to target a value of one US dollar. It is the base asset for Sky's stablecoin system and is governed through Sky governance by SKY token holders. Its collateral and obligations are intended to be verifiable onchain.
USDS exists alongside DAI in the Sky ecosystem, with an official 1:1 conversion path between them on Ethereum. The Peg Stability Module (PSM) allows USDS and USDC to be exchanged 1:1 in either direction, providing arbitrage-based peg support. USDS itself does not automatically accrue yield; it is the entry point to sUSDS and the Sky Savings Rate through Sky.money.
What problem does USDS solve?
USDS addresses the need for a transparent, onchain-governed dollar stablecoin that can serve as a reliable unit of account for DeFi without relying solely on centralized issuer promises. It provides a liquid entry point to Sky Protocol products, allowing stablecoin capital to access savings rates and other protocol primitives instead of remaining idle. The system aims to maintain its $1 target through diversified collateral and algorithmic stabilization rather than pure fiat backing.
How does USDS work?
USDS maintains its $1 target through the Peg Stability Module, which enables 1:1 swaps with USDC in both directions. Arbitrageurs profit from price deviations, pulling the market price toward parity. The token is backed by Protocol Collateral diversified across stablecoins, onchain and OTC crypto lending, short-duration Treasury bills, AAA corporate debt, and other approved structures.
Users can mint USDS against overcollateralized vaults. If collateral falls below its liquidation threshold, decentralized oracle valuations and automated auctions repay debt from the collateral before losses reach the wider system. Parameters are set by Sky Governance. USDS and DAI have an official 1:1 conversion route on Ethereum with no fees and no ability to enable fees on that route in the future.
Key facts
- Token standard: ERC-20
- Contract features: permit functionality and EIP-1271 smart-contract signature validation
- Upgrade design: UUPS pattern with ERC-1967 proxy storage standards
- Primary deployment: Ethereum, with deployment addresses published in Sky's protocol navigator
- Governance: Sky Governance, with SKY token holders participating in governance decisions
- USDS and DAI have an official 1:1 conversion route on Ethereum
- USDS is intended to remain accessible and liquid, but a $1 target is a design objective rather than a promise
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Frequently asked questions
What is USDS?
USDS, or Sky Dollar, is Sky Protocol's native stablecoin. It targets one US dollar and is issued within the protocol against its collateral and liquidity mechanisms.
Is USDS the same as DAI?
They are distinct token names in the Sky system, but Sky's official documentation provides an Ethereum converter that exchanges DAI and USDS at 1:1 with no fee on that route. Always verify the network and contract address before converting or transferring.
How does USDS maintain its dollar peg?
The main mechanism is the Peg Stability Module, which supports 1:1 USDC/USDS swaps in both directions. Arbitrage can help pull the market price toward $1, while overcollateralized vault issuance provides an additional supply-side mechanism.
What backs USDS?
Sky describes Protocol Collateral diversified across stablecoins, onchain and OTC crypto lending, short-duration Treasury bills, AAA corporate debt, and other approved structures. The collateral composition is published through Sky's financial dashboard.
Does holding USDS automatically earn interest?
No. USDS is the base asset and does not generate yield on its own. Users may supply it through Sky.money to access products such as sUSDS, but rates are variable or governance/product dependent and carry protocol, smart-contract, market, and access risks.
Can I convert USDS to USDC or DAI?
Yes, on supported routes. Sky documents 1:1 USDS/USDC conversion through the Peg Stability Module and 1:1 USDS/DAI conversion through the Ethereum DAI/USDS converter. Fees, supported networks, liquidity limits, and gas costs should be checked before transacting.
What risks should I consider with USDS?
The $1 target is not risk-free. Relevant risks include collateral volatility or impairment, oracle and liquidation failures, smart-contract or upgrade risk, governance decisions, liquidity or network constraints, and legal or geographic restrictions on related Sky.money products.
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