Defi Savings Protocol Sky placed a loss of the first quarter of $ 5 million after interest payments to token holders more than doubled, according to a report created by Sky-Broaders from Steakhouse Financial.
The loss is a grim turn from the previous quarter, when Sky, formerly known as Makerdao, registered a win of $ 31 million. The reason for the increase in interest payments by 102% is the decision to stimulate the use of the newer Sky Dollar Stablecoin (USDS) about the existing DAI.
“The savings of heaven was kept very high at 12.5% compared to the rest of the market, which stimulated massive inflow,” Rune Christensen, co-founder of Sky, told Coindesk about Telegram. When Sky started reducing the interest rates in February to 4.5%, many investors stayed around, he said.
The situation is a double -edged sword for the protocol, which was one of the first cohort of decentralized financial apps that in 2017 was repeatedly displayed on Ethereum.
Sky works similar to a traditional bank. It must borrow to others at a rate higher than it pays its savers.
Offering higher rates on USDS without a corresponding increase in the STABLECOIN demand the profitability of the protocol, paper empire, governance liaison at Blockchain Research and Development Company GFX Labs, Coindesk told Telegram.
“USDS is a great resistance to income,” he said. “Dai earns money. USDS, not so much.”
The push to USDS is part of Sky’s so -called end game plan, an initiative led by Christensen aimed at transforming the protocol into a more decentralized and resilient system.
No new question?
When Sky reversed from Makerdao in August and USDS launched as part of the endgame, the plan that the new Stablecoin would appeal to a different set of users than DAI.
USDS is designed to better comply with regulations and financial reporting requirements. It was aimed at advanced investors such as hedge funds, family agencies and other institutions that wanted to baptize their toes in decentralized finances.
But it is unclear whether USDS has been able to attract a considerable number of new users.
The return that investors can earn on USDS that have come to DAI is different: USDS pays 4.5%, while DAI yields 2.75%.
Many investors exchanged their DAI for USDS, which means that Sky had paid more to people who were more happy to earn a lower yield or, in many cases, no yield at all, Paper empire said.
Certainly, the report said that the combined delivery of USDS and DAI has increased by 57% since the beginning of the quarter. But a large part of this increase is from Ethena, the synthetic dollar protocol. It has piled up more than $ 450 million in deferred USDS and passes the proceeds on to those who use his own stablecoin, used.
In the past week, Ethena has switched part of its reserves from USDS to USDTB – a stablecoin supported by BlackRock’s USD Institutional Digital Liquuidity Fund of Buidl.
The movement means that there are fewer USDs in circulation. But it can also benefit the Sky by reducing the amount of interest that the protocol has to pay.
Read more: Makerdao’s Christensen hopes for ‘permanent decision’ while MKR holders vote for Sky Brand
