Is Sky Safe?
Risk Grade: B- (30/100)
Sky is rated as moderate risk — some novel mechanisms, generally well-understood.
Lower risk — one of DeFi's oldest and most tested stablecoins, but the rebrand adds governance complexity and the freeze function is a philosophical break from decentralization
Formerly MakerDAO, this is the protocol behind the USDS stablecoin (upgraded DAI), with $7.5B in deposits. You can earn ~6% savings yield on your USDS or borrow against crypto collateral. Its B- grade reflects years of battle-testing, weighed against new governance complexity and a controversial freeze function on USDS.
TVL
$5.2B
Mechanisms
10
Interactions
7
Value Grade
A-
Key Risks for Sky Users
USDS has a freeze function that can blacklist any address. This makes it censorable, like USDC. DeFi protocols might stop accepting USDS as collateral if the freeze is ever used
The new governance system splits decision-making across multiple sub-groups (Stars). During a market crash, these groups could disagree and deadlock, leaving the protocol unable to adjust fast enough to prevent bad debt
Part of the money backing USDS sits in real-world assets like US Treasuries. If those custodians fail or regulators freeze the assets, USDS could lose its $1 peg
Top Risk Factors
- •USDS freeze function introduces censorship risk that undermines decentralization, splitting the community between DAI purists and USDS adopters
- •Endgame SubDAO (Stars) governance is untested under market stress and could gridlock critical parameter changes when speed is essential
- •RWA collateral exposure introduces off-chain counterparty and legal jurisdiction risks to an on-chain protocol
How Sky Compares to Peers
Sky ranks #6 of 25 CDP protocols (top quartile — safer than most). At a risk score of 30/100, it's 7 points safer than the sector average of 37/100.
Adjacent peers: MakerDAO (B-, 29/100) is ranked just safer, and Felix CDP (B-, 33/100) is ranked just riskier.
Sky holds 43% of TVL across all rated CDP protocols ($5.2B of $12.2B total). Sector concentration here means a failure would have outsized systemic effects.
See the full CDP sector leaderboard or the Sky vs MakerDAO comparison.
Common Questions about Sky
Plain-English answers based on Sky's scores across Hindenrank's 8 risk dimensions. The highest-scoring (riskiest) dimension is Scale Exposure (9/10).
Has Sky ever been hacked or exploited?
Sky has a fairly clean operational history. The track record dimension scored 3/15, indicating minor or no significant incidents on record. A clean track record is a positive signal but it does not guarantee future safety, especially as protocol complexity grows.
How much money is at stake in Sky?
Sky currently holds over $5.2B in user deposits. A protocol of this size typically has deeper liquidity, more eyes on the code, and more attention from auditors — but it also means a single failure has a much larger blast radius.
What's the worst-case scenario for Sky?
Hindenrank has identified specific collapse scenarios for Sky. The most prominent: "USDS Freeze Function Censorship Cascade". The trigger condition is A major regulatory authority orders Sky to freeze USDS held by a large DeFi protocol or sanctioned entity, triggering a confidence crisis in USDS censorship resistance. Reading through the full scenario list on the protocol page is the single best way to understand the actual failure modes — generic "smart contract risk" is rarely the thing that takes a protocol down.
Is Sky regulated or insured?
Sky has low regulatory exposure on Hindenrank's framework (3/10). The protocol is structured in a way that minimizes counterparty and jurisdiction concentration, though regulatory risk in crypto can change rapidly. No DeFi protocol carries FDIC-style insurance — even with low regulatory risk, depositors are not protected in the way bank customers are.
What are the biggest red flags for Sky?
Hindenrank's retail-focused risk audit flagged: USDS has a freeze function that can blacklist any address. This makes it censorable, like USDC. DeFi protocols might stop accepting USDS as collateral if the freeze is ever used The new governance system splits decision-making across multiple sub-groups (Stars). During a market crash, these groups could disagree and deadlock, leaving the protocol unable to adjust fast enough to prevent bad debt Part of the money backing USDS sits in real-world assets like US Treasuries. If those custodians fail or regulators freeze the assets, USDS could lose its $1 peg
Should beginners deposit into Sky?
Sky is rated B-, which is acceptable for users who understand the protocol's mechanism. Beginners should read the full risk breakdown and only deposit after they can articulate the top three failure modes. If you cannot explain how the protocol works, do not deposit.
How does Sky compare to safer CDP alternatives?
Sky is one protocol in Hindenrank's CDP coverage. The safest CDP protocols on the leaderboard tend to share three traits: a long incident-free track record, conservative mechanism design, and high-quality public documentation. Compare Sky against the full CDP ranking before committing capital.
For the full 8-dimension score breakdown, the radar chart, and dependency graph, see the Sky risk report.
Read the Full Sky Risk Report
This protocol has 3 collapse scenarios. 3 high-severity interaction risks identified. See the full mechanism classification, interaction matrix, and deep-dive recommendations.
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