Sky Protocol built up its loans in 2024, leading to record interest fees in December. Тhe successful month also wraps up one of the best years for the DeFi lending protocol since its 2021 peak.
Sky Protocol locked in $22.18M in earnings for December, the highest level for the past six months, based on TokenTerminal data. Its performance reflects several trends in the past year, including DeFi’s overall recovery.
Sky Protocol (formerly MakerDAO) achieved peak earnings in December, reflecting the market rally in Q4. | Source: DeFi Llama
Most of the protocol fees also reflect the usage of DAI/USDS, the native stablecoin used for loans. In the past year, the supply of DAI rose to $6.2B, the highest level since the 2022 peak of $7.24B DAI. The creation and circulation of DAI are no longer tied to the MKR asset but rely on a wider selection of collaterals.
Sky Protocol shifted its collateral balance in the past year
The supply growth in the past year was achieved through a more diverse mix of collaterals, including tokenized T-bills. With this move, Sky Protocol became one of the drivers of RWA adoption, as the crypto sector put some of its earnings into T-Bills and then used them to secure additional growth.
The third trend is the successful swap from MakerDAO to Sky Protocol. Over the past 12 months, the DeFi protocol had to go through rebranding in addition to overhauling its collaterals. As a result, MakerDAO stepped back, leaving Aave (AAVE) to become the top lending protocol. Some of the sub-DAO projects also relied on Aave for their passive yield, creating special vaults.
Despite the slowdown against Aave, the treasury of Sky Protocol is also at a peak. The project holds $2.1B in its treasury as an additional security for the dollar peg of DAI/USDS.
DAI/USDS is now supported by three main types of collateral. Crypto vaults hold more than $3.43B in value locked. The Peg Stability Module (PSM) holds special vaults with $1.56B in assets. Tokenized securities make up $296M after a recent removal of liquidity. RWA vaults shifted down from their peak valuation of $3.2B in 2023.
The collaterals of Sky Protocol are not fixed and may reflect market conditions and potential risks. During bull market periods, DAI/USDS is more widely used for loans.
The market rally in the last quarter of 2024 was immediately reflected in Sky Protocol’s revenues, which reached a peak of $1.3M in daily fees on December 7.
Sky Protocol to push more for USDS adoption next year
Sky Protocol continues with its calls to switch from DAI to USDS next year. The protocols also plan to grow more aggressively in the coming months, regaining a higher position as DeFi lending expands.
At the end of 2024, more than $49B were locked in lending protocols, which exist on almost all leading chains. While Maker and Sky are not directly competing, the sub-DAO Spark Protocol rose to the second-highest spot, with $4.37B in value locked. However, the Sky ecosystem still lags behind Aave, which holds between $18B and $20B in loans and collaterals.
Sky Protocol will aim to boost its position on Solana after starting the inflows of USDS into the new chain. In 2025, the protocol aims to offer full lending services, potentially competing with established lenders like Kamino Finance. Toward the end of 2024, the supply of USDS on Solana increased to over 100M tokens based on bridging data. The milestone was achieved just a week after the launch of USDS on Solana.
The main use case for USDS is its passive income, with a savings rate of 12.5%. The supply of USDS grew above 1B tokens in the past year after spreading to multiple lending protocols. USDS can be staked for savings income through Sky, Spark Protocol, as well as Kamino Protocol and Drift on Solana. USDS has also spread to Base, which carries a version of Spark Protocol.
Sky Protocol hopes to expand on expectations for a more crypto-friendly climate in 2025. In the coming year, both SKY and MKR tokens will remain deflationary, with no new mints except in extraordinary circumstances to protect the peg of DAI.
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