One of the project's main challenges is identifying the levers that can drive sustained growth. This is not an easy task, as the overcollateralized stablecoin model inherently ties growth to credit demand—which is, by nature, highly cyclical. Additionally, the model is constrained by the limited market capitalization of the asset universe deemed acceptable as collateral. The $10 billion target—which would surpass the project’s all-time high reached in 2022—has proven to be a difficult ceiling to break.

MakerDAO’s growth can be attributed partly to the broader expansion of the stablecoin market—especially the increased demand for leverage—and partly to the project’s own strategic initiatives. In this context, the significant surge experienced by the protocol in late 2024 and early 2025, in my view, was largely driven by the high interest rate of 12.5%, which positioned it as the most attractive yield opportunity. This is clearly reflected in the Sky Savings data. In contrast, the impact of farming initiatives like Chronicle saw only limited demand, never exceeding a few tens of millions. SPK incentives, on the other hand, were consistently active throughout the year across multiple rounds.

Delivering such high yields would be excellent, but it’s simply not sustainable—especially at a time when the project has reduced its interest margin. Unlike DAI, USDS lacks significant non-yield-seeking demand. This is partly because the asset has not been actively positioned or incentivized for broader use in payments or trading.

This can be seen in the figures reported by Steakhouse under the net interest margin. This metric reflects the project's ability to offer a competitive interest rate—effectively, the headroom available to deliver an above-market yield. In this regard, the USDS strategy results in lower margins compared to DAI, which followed a different approach and can still be found deployed in yield-generating pools such as Curve

The ongoing migration from MKR to SKY will result in the effective retirement of a significant number of tokens that will likely never be recovered. This reduction in circulating supply should enhance SKY’s attractiveness in the eyes of the market. Additionally, shifting investment and operational efforts into the broader SKY ecosystem is expected to offload core expenses and improve overall profitability.

That said, the long-term success ultimately hinges on achieving sustained growth—a goal that continues to prove elusive. The impact of value creation through token distributions such as SPK, CLE, and other potential Stars remains marginal for SKY so far. However, these initiatives could eventually offset the substantial expenditures made over the years. The timing and pricing of these tokens remain uncertain and will likely be heavily influenced by the performance and adoption of SKY itself, as it is their primary economic anchor.

The project currently appears undervalued, and the most rational explanation is that the market perceives MakerDAO as struggling to find sustainable growth—despite years of significant spending. There’s a growing skepticism around the token’s ability to capture the value being created through the investment in Stars.

These are critical challenges for the protocol, especially given that, so far, the data seems to support this cautious outlook. However, I believe there are relatively straightforward strategic decisions the project could make to shift these dynamics—long-standing patterns that are now holding it back.

Sky Community Call Summary — June 4, 2025

USDS Market Update Overall supply remains stable this week, with inflows balanced across different sources.

Key demand drivers:

• Pendle continues to be a critical engine of demand for both USDS and SUSD.

• Maple Finance contributes through short-term liquidity provisioning.

• Optimism and Unichain have been added as part of the multichain rollout.

Borrowing demand for USDS is increasing across Aave and Spark, signaling growing real-world utility.

Governance Migration from MKR to SKY The protocol has successfully completed the transition of governance from MKR to SKY.

MKR now serves solely as a claim on SKY and will be fully deprecated over time.

A graceful penalty system is in place:

Starting September 18, 2025, a 1% penalty will apply every 3 months for unconverted MKR (up to 100% in 25 years).

Goal: Accelerate migration and remove confusion and inefficiencies caused by dual tokens.

Launch of SKY Staking SKY staking is now live, with initial yields at 15–16% APY.

Rewards are sourced from:

250,000 USDS/day from the protocol surplus buffer (split 50/50 between buybacks and staking).

Upcoming token distributions from incubated “Star” projects like Spark (SPK):

~15% of SPK’s total supply will go to SKY stakers over 10 years, half within the first two.

Economic Sustainability The system is currently overspending by ~200,000 USDS/day (500k spent vs. 300k in revenue).

Sustainability measures include:

• Expected inflows (e.g., large PSM USDC income).

• Additional rewards from new Stars.

Improvements in surplus buffer accounting, which currently has a ~$7M reporting discrepancy.

Upcoming Developments YUSDS: A new product allowing users to borrow against staked SKY without losing rewards—boosting capital efficiency.

Smart Burn Engine: A dynamic buyback mechanism tied to valuation models and token price.

More Star Launches: At least 4 major Stars are expected to launch with farming this year, distributing additional rewards to stakers.