Sky Labs Posts $5 million in First-Quarter Loss

The loss was a clear shift compared to the previous quarter, when Sky (formerly known as Makerdao) made $31 million in profits.

According to a report by Steakhouse Financial, Defi Savings protocol Sky reported that interest payments to token holders have more than doubled, losing $5 million.

By comparison, profits in the previous quarter were $31 million.

The reason for the 102% increase in interest payments was the decision to incentivize the use of existing DAIs by the New Sky Stable Stock (USDS) using the agreement.

“The sky savings rate remained at a height of 12.5% ​​relative to the rest of the other markets, driving a large amount of inflows. As we started to reduce the rate in February to 4.5%, although the rate was lower, despite the lower savings rate, and began to redeem its savings rate and began to swap USDS’s savings rate for 4.5% to continue sharing the announcement of 4.5%, which is in line with Crunementer’s maximum.

This situation is a double-edged sword for the protocol, one of the first queues of decentralized financial applications to appear on Ethereum in 2017.

The sky works similarly to traditional banks because it requires loans to others at a higher rate than savers. However, in the absence of correspondingly increasing demand for stability, offering higher USD interest rates is undermining the profitability of the agreement, paper maintenance, governance contacts for blockchain R&D company GFX Labs.

"USDS is the main barrier to income. We see the Unout nouthхµlвхL for USDS in these results. Basically the impact on demand for USD. Basically, more people hold USD, resulting in higher liability for the balance sheet, which has a higher benefit. This negatively affects the bottom line," he said. ”

Promoting USD is part of Sky’s so-called final field plan, an initiative led by Christensen aims to transform the agreement into a more decentralized and resilient system.

When Sky renamed from Makerdao and launched USDS in August as part of Endgame, the plan was that the new Stablecoin would attract users different from DAI.

It aims to better comply with regulations and financial reporting requirements and target established investors such as hedge funds, home offices and other institutions that want to dip their toes into diversified finances. But it is not clear whether it will attract a large number of new users.

The returns of stablecoins that investors can earn vary: USDS pays 4.5%, while DAI yields 2.75%. Paperimperium said many investors swap their DAI for USD, meaning Sky has paid more to people who were previously happy to win lower yields, or in many cases there is no yield at all.

To be sure, the report said that total USD and DAI supply has increased by 57% since the start of the quarter. However, a large part of this growth comes from the comprehensive dollar agreement Ethena. It has spent more than $450 million on stored USD and passes yields to those who have their own Stablecoin USDE.

Over the past week, Ethena has converted some of its reserves from USDS to USDTB, a Stablecoin backed by BlackRock's USD institution Digital Liquidity Fund or Buidl.

This move means less circulation. However, it may also benefit the sky by reducing the amount of interest the agreement must pay.

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