From DAI to USDS: Earn 4% APY on Sky Protocol's Migration

When MakerDAO rebranded to Sky Protocol in September 2024, it marked a pivotal shift in the DeFi stablecoin landscape. The platform introduced USDS—a new stablecoin succeeding DAI at a 1:1 conversion ratio—and SKY, a governance token designed to replace MKR. While the migration is entirely optional with no forced conversion deadlines, understanding the differences between DAI and USDS and how to execute the swap is essential for any DeFi participant holding these assets.

This guide walks you through the DAI to USDS migration process, explains what's changed under the hood, and helps you decide whether to upgrade your holdings based on your yield and governance goals.

What Is Sky Protocol? Understanding the Maker Rebrand

MakerDAO transformed into Sky Protocol on September 18, 2024, as part of its ambitious Endgame Plan to scale decentralized finance. This rebrand introduced two fundamental changes: the DAI stablecoin was upgraded to USDS, and the governance token MKR was converted to SKY at a 1:24,000 ratio.

The migration is entirely voluntary. Neither DAI nor MKR holders face forced conversion or expiry deadlines—legacy tokens continue to function with full backward compatibility. This means you can hold DAI indefinitely without upgrading, but doing so prevents you from accessing Sky's new yield-generating features.

DAI vs USDS: What Changed and Why It Matters

At its core, USDS maintains the same 1:1 conversion ratio as DAI, with zero protocol fees for the upgrade. Both tokens are backed by the same overcollateralized model using crypto assets and Real World Assets (RWA).

However, USDS unlocks several features unavailable on legacy DAI. The most significant is the Sky Savings Rate (SSR), which offers approximately 4% APY on USDS deposits with no lockup period or minimum balance requirements. Holders also qualify for Sky Token Rewards (STRs), incentive programs that run simultaneously with SSR for early adopters.

Beyond yield, USDS benefits from expanded collateral options and enhanced cross-chain functionality. The SkyLink bridge enables USDS to move seamlessly across Ethereum, Arbitrum, Optimism, Polygon, and Avalanche, maintaining a 1:1 peg on all supported chains. This cross-chain integration expands USDS utility far beyond Ethereum mainnet.

Step-by-Step Guide: How to Migrate DAI to USDS

Converting your DAI to USDS is straightforward and can be completed in five minutes. Here's the process:

Step 1: Navigate to the Sky Application Open your browser and visit app.sky.money. Ensure you're on the official Sky domain to avoid phishing scams.

Step 2: Connect Your Web3 Wallet Click "Connect Wallet" and select your preferred wallet (MetaMask, WalletConnect, Ledger, etc.). Approve the connection prompt.

Step 3: Locate the Upgrade Widget Once connected, you'll see the Upgrade widget prominently displayed. This is your migration entry point.

Step 4: Enter Your Conversion Amount Select the amount of DAI you wish to convert to USDS. The widget displays the equivalent USDS amount at the fixed 1:1 ratio—no slippage, no price impact.

Step 5: Confirm and Pay Gas Review the transaction details. You'll only pay standard Ethereum gas fees; there are no protocol fees. Confirm the transaction in your wallet.

The LitePSM module handles the on-chain conversion instantly. Your DAI will disappear from your wallet balance and be replaced with USDS within one block.

Bidirectional Conversion: One key feature is that USDS can be converted back to DAI at any time using the same process in reverse. This flexibility ensures you're never locked into USDS if your needs change.

Converting MKR to SKY: Governance Token Migration for Token Holders

If you hold MKR governance tokens, the migration process is similar but the conversion ratio differs significantly. MKR converts to SKY at a 1:24,000 ratio—one MKR token becomes 24,000 SKY tokens.

This ratio is intentional. The lower per-token price of SKY is intended to make governance participation accessible to a broader range of users. MKR holders maintain their relative governance stake in the new system based on their proportional holdings.

Legacy MKR remains fully functional and can be converted at any time. To execute the conversion, follow the same process as DAI→USDS: visit app.sky.money, connect your wallet, and use the Upgrade widget to swap MKR for SKY.

Earning Yield on USDS: Sky Savings Rate (SSR) Explained

The Sky Savings Rate is the primary incentive for migrating from DAI to USDS. SSR is an automated mechanism that distributes protocol revenue to USDS holders without requiring active staking or smart contract interaction.

How SSR Works: Simply hold USDS in an eligible wallet or DeFi protocol, and you earn approximately 4% APY automatically. There are no minimum balance requirements, no lockup periods, and no complex procedures. Yield accrues passively.

Additional Rewards: Early adopters also receive Sky Token Rewards (STRs), which run simultaneously with SSR. These time-limited incentives reward early migration participation.

USDS-Only Feature: It's critical to note that SSR is exclusive to USDS holders. Legacy DAI holders cannot access these yield mechanisms, which is a primary reason many users choose to upgrade.

Geographic Restrictions: SSR and SKY Token Rewards are not available to users in the United States and United Kingdom. If you are based in these regions, DAI-to-USDS conversion is still possible, but yield features may be restricted or unavailable.

Moving USDS Across Chains: SkyLink Cross-Chain Bridge

SkyLink is Sky Protocol's native cross-chain bridge, enabling USDS to operate across five major blockchain networks. USDS can move seamlessly between Ethereum, Arbitrum, Optimism, Polygon, and Avalanche while maintaining a strict 1:1 peg.

This multi-chain deployment significantly expands USDS utility. Instead of being confined to Ethereum mainnet, USDS holders can:

Deploy capital across layer-2 solutions (Arbitrum, Optimism) for lower fees
Participate in DeFi protocols on other layer-1 blockchains (Polygon, Avalanche)
Maintain stable asset exposure regardless of which network they're actively using
Improve composability across fragmented DeFi ecosystems

SkyLink serves as a single integration point for USDS access, simplifying multi-chain stablecoin management.

Should You Migrate Now? Risk Considerations and Adoption Reality

The critical question: is it time to upgrade from DAI to USDS?

Protocol Health Metrics: Sky Protocol's fundamentals remain robust. The protocol controls $6.2B in total value locked (TVL), making it a top-4 DeFi platform by size. Annual fees exceed $413.5M, confirming consistent protocol activity and revenue generation.

Adoption Reality: One year post-rebrand, USDS adoption evolved differently than originally projected. While DAI was expected to migrate en masse to USDS, the opposite occurred: DAI unexpectedly resurged in adoption even as USDS became available. This slower-than-expected USDS growth reflects user preferences for maintaining established token standards and risk-averse positioning.

The Migration Decision: There is no rush. Legacy DAI continues to work indefinitely with no expiry date or forced conversion. Migration should be driven by personal needs, not FOMO:

Migrate if you seek yield: SSR's 4% APY on USDS is meaningful for large holders seeking passive income.
Migrate if you want governance participation: SKY token conversion enables voting rights in the new governance structure.
Hold DAI if you prefer simplicity: Legacy DAI remains a stable, proven stablecoin with no pressure to upgrade.

Conclusion

The Maker/Sky Protocol migration represents a significant evolution in DeFi's largest decentralized stablecoin ecosystem. The transition from DAI to USDS introduces new yield mechanisms via the Sky Savings Rate, enhanced cross-chain utility via SkyLink, and a redesigned governance system via SKY tokens.

The migration is entirely voluntary—you maintain full control over when (or if) to upgrade. For DeFi users seeking additional yield or governance participation, USDS offers clear benefits. For those satisfied with DAI's simplicity and stability, the option to hold legacy DAI indefinitely removes migration urgency.

Ready to Migrate?

Visit app.sky.money to begin your upgrade. Start by converting a small amount of DAI to USDS to experience the process, then scale up once you're comfortable. Join the Sky Discord community to stay updated on protocol developments, governance votes, and SSR rate changes.

Whether you migrate today or wait for future protocol developments, understanding the DAI→USDS pathway positions you to make informed decisions about your DeFi holdings.