USDC Channel Cost Eats Into Profit, MakerDAO Records $5 Million Loss in Q1

Original Article Title: DeFi Savings Protocol Sky Slumps to $5M Loss as USDS Interest Payments Wipe Out Profit
Original Article Authors: Tim Craig & Sheldon Reback, CoinDesk Contributors
Original Article Translation: DeepL Translation

Editor's Note: DeFi savings protocol Sky (formerly MakerDAO) suffered a $5 million loss in the first quarter of 2025, a stark contrast to the $31 million profit recorded in the previous quarter. The loss was primarily due to incentivizing the use of the new stablecoin USDS instead of DAI, leading to a 102% increase in interest payments. Despite USDS aiming to attract sophisticated investors, its user base growth is unclear, and the protocol's profitability is weighed down by high interest rates.

The following is the original content (slightly edited for readability):

TL;DR

· DeFi savings protocol Sky (formerly MakerDAO) incurred a $5 million loss in the first quarter, a significant drop from the $31 million profit 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 introduced to attract sophisticated investors, it is not yet clear whether it has significantly expanded Sky's user base.

Sky Co-Founder Rune Christensen (original image provided by Trevor Jones)

According to a report from Sky contributor Steakhouse Financial, DeFi savings protocol Sky incurred a $5 million loss in the first quarter, as interest payments to token holders more than doubled.

This loss is a stark contrast to the previous quarter when Sky recorded a $31 million profit. The 102% increase in interest payments was a result of the protocol's decision to incentivize users to use the newer Sky Dollar stablecoin (USDS) instead of the existing DAI.

"Sky's savings rate remained at 12.5%, which was very high compared to other parts of the market, attracting a large influx of funds," Sky Co-Founder Rune Christensen told CoinDesk via Telegram. Even when Sky reduced the rate to 4.5% in February, many investors chose to stay, he said.

This situation is a double-edged sword for the protocol, which was one of the first decentralized finance applications to emerge on Ethereum in 2017.

Sky operates similarly to a traditional bank. It needs to lend to others at a rate higher than what it pays depositors.

However, providing a higher rate without a corresponding increase in USDS demand is hurting the protocol's profitability, according to governance liaison PaperImperium of blockchain research and development company GFX Labs, as communicated to CoinDesk via Telegram.

"USDS is a significant drag on revenue," he said. "DAI makes money, USDS does not."

Promoting USDS is part of Sky's so-called "endgame plan," led by Christensen, aimed at transforming the protocol into a more decentralized and resilient system.

No New Demand?

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

USDS is designed to be more compliant with regulations and financial reporting requirements, targeting sophisticated institutional investors such as hedge funds, family offices, and others looking to get involved in decentralized finance.

However, it is unclear whether USDS has attracted a significant number of new users.

Investors earn different yields on USDS and DAI: USDS offers a 4.5% yield, while DAI offers 2.75%.

Many investors have swapped DAI for USDS, meaning Sky needs to pay more to those users who were previously satisfied with lower yields or even no yield, according to PaperImperium.

Reports indicate that since the beginning of this quarter, the total supply of USDS and DAI has increased by 57%. However, a significant portion of this growth comes from the synthetic dollar protocol Ethena, which has poured over $450 million into staking USDS and passes the yield on to users staking its own stablecoin, USDe.

Over the past week, Ethena has shifted some of its reserves from USDS to USDtb—a stablecoin backed by BlackRock's USD Institutional Digital Liquid Fund (BUIDL).

This move signifies a reduction in circulating USDS. However, it may also benefit Sky by reducing the amount of interest the protocol must pay.

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