USDS

The dollar token of Sky — the ecosystem that grew out of MakerDAO and its DAI stablecoin. USDS is offered as an updated take on the same machinery: collateral sits in smart contracts, and minting and redemption follow protocol rules rather than an issuing company's decisions.

Holders get an interest mechanism: the token can be deposited into the protocol's savings contract, where the yield is assembled from borrower payments and collateral returns, with the rate set by governance votes. Conversion between USDS and the older DAI is open in both directions at par, so the two versions coexist rather than one forcibly replacing the other. Governance lives in a separate token, and decisions on rates, collateral and limits are made by the people holding it.

The dollar peg is upheld not by a bank account but by the protocol's balance sheet and its ability to retire tokens against the collateral behind them. Both tokens draw on the same pool of collateral, so what separates them is rules and interface rather than backing.

Part of the collateral behind such protocols consists of centralised dollar tokens, so their independence from the banking system is only partial.