The USDS channel costs are eroding profits, with MakerDAO reporting a loss of 5 million USD in the first quarter.

Original Title: DeFi Savings Protocol Sky Slumps to $ 5 M Loss as USDS Interest Payments Wipe Out Profit Original authors: Tim Craig & Sheldon Reback, CoinDesk authors Original compilation: Rhythm small deep

Editor's note: The DeFi savings protocol Sky (formerly MakerDAO) reported a loss of 5 million USD in the first quarter of 2025, in stark contrast to a profit of 31 million USD in the previous quarter. The loss is primarily due to incentives for using the new stablecoin USDS instead of DAI, resulting in a 102% surge in interest payments. Although USDS is designed to attract seasoned investors, its user base growth remains unclear, and the protocol's profitability is hindered by high interest rates.

The following is the original content (for ease of reading and understanding, the original content has been reorganized):

TL;DR

· The DeFi savings protocol Sky (formerly MakerDAO) suffered a loss of 5 million USD in the first quarter, a significant decline from a profit of 31 million USD in the previous quarter.

To incentivize users to use the new stablecoin USDS instead of DAI, the protocol increased interest payments to depositors by 102%.

· Although USDS was launched to attract sophisticated investors, it remains unclear whether it has significantly expanded Sky's user base.

Sky co-founder Rune Christensen (Image provided by Trevor Jones)

According to a report by Sky contributor Steakhouse Financial, the DeFi savings protocol Sky lost $5 million in the first quarter due to interest payments to token holders more than doubling.

This loss stands in stark contrast to the previous quarter, when Sky recorded a profit of $31 million. The reason for the 102% increase in interest payments is that the protocol decided 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," said Sky co-founder Rune Christensen via Telegram to CoinDesk. When Sky lowered the rate to 4.5% in February, many investors still chose to stay, he said.

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 traditional banks. It needs to lend to others at a higher interest rate than what it pays to depositors.

However, providing higher interest rates without a corresponding increase in USDS demand is damaging the protocol's profitability, said PaperImperium, a governance contact at blockchain research and development firm GFX Labs, via Telegram to CoinDesk.

"USDS has a significant drag on returns," he said. "DAI makes money, but USDS does not."

Promoting USDS is part of Sky's so-called "final plan," which is led by Christensen and aims to transform the protocol into a more decentralized and resilient system.

No new demands?

When Sky rebranded from MakerDAO and launched USDS in August as part of the final plan, the idea was that the new stablecoin would attract a different user base than DAI.

USDS is designed to better comply with regulatory and financial reporting requirements, aiming to attract sophisticated institutional investors such as hedge funds, family offices, and others looking to get involved in Decentralized Finance.

But it is still unclear whether USDS has attracted a large number of new users.

The returns available to investors on USDS and DAI are different: USDS pays a yield of 4.5%, while DAI offers 2.75%.

Many investors have exchanged DAI for USDS, which means that Sky needs to pay more to those users who were previously satisfied with lower yields or even no yields, according to PaperImperium.

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 has contributed over $450 million to staked USDS and passed the yields to users staking its own stablecoin USDe.

In the past week, Ethena has shifted part of its reserves from USDS to USDtb—a stablecoin backed by BlackRock's dollar institutional digital liquidity fund (BUIDL).

This move means that the circulating USDS will decrease. However, it may also benefit Sky by reducing the amount of interest the protocol has to pay.

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