sDAI is a yield-bearing stablecoin that turns idle DAI into a ~6.5% APY earning asset - without
moving your DAI into a lending pool, without lockups, and without borrower default risk. It is one
of the most elegant DeFi primitives: a token that just sits in your wallet and gets more valuable
over time.
sDAI stands for Savings DAI. It is an ERC-4626 tokenized vault that wraps your
DAI and deposits it into the DAI Savings Rate (DSR) contract operated by MakerDAO.
In exchange for depositing DAI, you receive sDAI at a 1:1 ratio. Your sDAI then accumulates
value at the DSR rate - every second, every block, the price of sDAI creeps closer to $1.065
(at 6.5% APY), $1.13 (after 2 years), and so on.
The magic is in the price-based model. Unlike traditional rebasing tokens where your
balance increases (like stETH), with sDAI your balance stays the same - it's your
price per token that rises. This is cleaner for DeFi integrations because you don't
need to track constantly changing token counts. A token count of 1,000 sDAI means you deposited
1,000 DAI; the current price tells you what that's worth now.
Property
sDAI
Plain DAI
USDC (holding)
Current yield
~6.5% APY
0%
0%
Token price
Starts at $1, rises over time
Always $1
Always $1
Smart contract risk
DSR + Spark integration
Minimal (DAI itself)
Minimal (Circle)
Can be used as collateral
Yes (ERC-4626)
Yes
Yes
Can be bridged
Yes (with yield preservation*)
Yes
Yes
Auto-compounding
Yes (price appreciation)
No
No
* Bridge yield preservation depends on the specific bridge implementation. Not all bridges
handle yield-bearing tokens correctly.
How sDAI Accumulates Yield: The Math
When you deposit DAI into Spark's sDAI vault, the vault credits you sDAI at a 1:1 ratio.
Behind the scenes, your DAI goes into the DSR contract. Every block (~12 seconds on Ethereum),
the DSR contract calculates the accumulated yield and updates the virtual accrual
factor - essentially a number that scales how much each sDAI token is worth.
Price Accumulation Formula
sDAI_price(t) = 1.0 e(dsr_rate t)
Where t = time in years, dsr_rate = annual rate (e.g. 0.065 for 6.5%).
At 6.5% APY: after 1 year -> $1.065, after 2 years -> $1.136, after 5 years -> $1.377
The key distinction from rebasing: in a rebasing model, your balance would grow from
1,000 -> 1,065 after one year. In sDAI's price model, your balance stays 1,000 but the
price rises to $1.065. Both approaches yield the same result - 6.5% more value. The price
model was chosen because it makes sDAI compatible with more DeFi protocols (they can just
read the price, no need to track balance deltas).
Simulated sDAI price trajectory at 6.5% APY (animated - assumes consistent rate, actual rate varies)
DSR + Spark: Combined Yield Math
The sDAI yield comes from the DSR, which is funded by MakerDAO's protocol revenue. However,
there's an important nuance: not all sDAI deposits are equal. If you supply DAI to
SparkLend with DSR integration enabled, your DAI is automatically deposited
into the DSR every block - you earn the DSR rate and your DAI remains in a lending
pool where it can earn additional supply interest from borrowers. This dual-earning is
unique to Spark's architecture.
Yield Stack on Spark DAI Supply
Base Layer: DSR
~6.5%
Always-on yield from MakerDAO surplus. Funded by CDP fees, PSM fees, D3M interest.
Bonus Layer: Supply Interest
~0.5-2%
Additional interest from borrowers using your DAI. Variable - higher when DAI utilization is high.
Total Estimated Yield
7-8% APY
Vs 6.5% DSR-only, or 3-4% plain Aave DAI supply
Compare this to supplying DAI to Aave without Spark's DSR integration: you'd earn
the Aave DAI supply rate (~3-4%) with no savings rate. Or holding plain DAI in your
wallet: 0%. Spark's architecture creates a significantly higher yield for DAI depositors,
which is why Spark consistently attracts large DAI deposits.
sDAI Use Cases in the Wild
Because sDAI is an ERC-4626 standard, it integrates cleanly across the DeFi stack.
Here are the most common ways sDAI holders put their yield-bearing stablecoin to work:
Collateral in Aave / Morpho
Deposit sDAI as collateral to borrow ETH, wstETH, or stablecoins at favorable rates.
Your sDAI earns 6.5% while you access leverage. Health factor management critical.
Cross-Chain LP
Provide sDAI to Balancer or Curve stablecoin pools on Arbitrum, Base, or Ethereum.
Earn trading fees + DSR yield simultaneously. One of the highest real yield venues in DeFi.
*
Delta-Neutral Strategies
Long sDAI (earn DSR) + short DAI on futures/perps. Capture the spread without directional
price risk. Complex but popular among sophisticated DeFi traders.
Treasury Management
DAOs and protocols hold sDAI as treasury reserves. Earn yield on idle stablecoins while
maintaining liquidity for operations. Better than USDC treasury yields in many cases.
Leveraged Staking Hedge
Deposit ETH -> borrow DAI -> convert to sDAI. You're effectively levering into the DSR
while your ETH collateral still earns staking yield. High risk, high reward.
?
DeFi Safety Net
Convert volatile DeFi positions into sDAI during market uncertainty. Earn yield while
waiting for opportunities. sDAI is the 'cash' position in the Sky ecosystem.
sDAI Yield Comparison Calculator
Compare what you'd earn holding sDAI vs. DAI in Aave vs. USDC in Aave vs. plain USDC in a
bank account. The differences are substantial over time.
sDAI (DSR)
$0
final value
Aave DAI
$0
final value
Aave USDC
$0
final value
Bank (4%)
$0
final value
sDAI advantage vs Aave USDC after 1 year:
$0
Assumptions: sDAI ~6.5%, Aave DAI ~3.5%, Aave USDC ~4.5%, Bank ~4% APY.
Rates are estimates and will change - check current rates before depositing.
APY compounds annually for illustration.
sDAI / DSR Historical APY Trajectory
The DSR has never been static - it fluctuates with MakerDAO's revenue, market conditions,
and Sky DAO governance decisions. Understanding the historical range helps set realistic
expectations for future yields.
2020 Peak
12%
DeFi summer yield frenzy
2022 Bear
3-4%
Market crash, low CDP activity
2023 Rebrand
5-6%
Sky launch, stable rates
2024-2025
5.5-7%
Steady, competitive
Mid-2026
~6.5%
Current DSR rate
The takeaway: DSR rates are cyclically sensitive to crypto market conditions, but have
settled into a 5-7% 'target range' since the Sky rebrand. Sky DAO can adjust the rate
up or down via governance vote, which gives the protocol flexibility to respond to competition
(e.g., if Ethena or other protocols offer higher stablecoin yields, Sky can raise the DSR).
Frequently Asked Questions
How does sDAI actually accumulate yield - is it rebasing or price-based?
sDAI uses a price-based accumulation model, not a traditional rebasing model. When you deposit 1,000 DAI you receive exactly 1,000 sDAI. Your sDAI balance never changes. But the price of sDAI rises above $1 as yield accrues. After one year at 6.5% APY, each sDAI is worth ~$1.065, meaning your 1,000 sDAI is now worth ~$1,065. This is mathematically equivalent to rebasing but avoids the accounting complexity of token-count increases. The result is the same: your holdings grow in value at the DSR rate.
What makes sDAI different from just holding DAI in my wallet?
Plain DAI in your wallet earns 0% yield. sDAI is DAI deposited into the DSR contract, so it earns ~6.5% APY automatically, block by block. The DSR is funded by MakerDAO's protocol revenue from collateral interest and stablecoin activity. sDAI is the only way to put your DAI to work without moving it into a lending pool where you'd take on borrower default risk. The yield is as safe as DAI itself, because your DAI is still held in MakerDAO's Vat - you're just authorizing Spark to deposit it on your behalf.
Can I lose money with sDAI? Is it risk-free?
sDAI is not risk-free - nothing in DeFi is. The main risk is smart contract risk: if the DSR contract or Spark's integration has a bug, your DAI could be at risk. The DSR contract has been operating since 2020 with no reported losses, but that doesn't guarantee future safety. The second risk is DAI depeg: if DAI loses its $1 peg, your DAI deposits (and thus your sDAI) would be worth less than $1. This is the same risk as holding DAI. There is no inflation or token dilution risk - sDAI just represents your share of the DSR deposits.
How is the sDAI yield generated? Where does the 6.5% come from?
The DAI Savings Rate is funded by MakerDAO's protocol revenue, primarily from: (1) Stability fees on DAI collateral (CDPs) - typically 2-5% on ETH collateral, (2) Border stablecoin fees - when USDC or USDT are converted to DAI via the PSM, MakerDAO captures a fee, (3) Liquidation penalties on undercollateralized positions, and (4) Surplus from DAI/USDS borrowing on SparkLend via the D3M. This revenue is accumulated in MakerDAO's surplus buffer, and a portion is distributed to DSR depositors as the savings rate. The rate is governance-set, so Sky DAO decides how much of the surplus flows to DSR vs. is held as reserves.
How does sDAI perform in a cross-chain context? Can I bridge it?
sDAI is an ERC-20 and can be bridged using standard bridge infrastructure. However, the key advantage of sDAI over bridging regular DAI is that it continues earning yield even while bridged and held in a different wallet or on a different chain (if the bridge supports it). Some bridges support 'yield-bearing' bridging where the sDAI balance on the destination chain reflects the current price (not just the nominal DAI amount). Spark's own PSM bridges on Base and Arbitrum support native USDS minting, which can then be deposited into sDAI on those chains. Always verify bridging yield preservation with the specific bridge provider.
What is the difference between sDAI and sUSDS?
sDAI and sUSDS are both ERC-4626 savings vault tokens in the Sky ecosystem. sDAI is backed by DAI deposited into the DSR, and its yield is the DAI Savings Rate. sUSDS is backed by USDS (Sky's stablecoin, formerly USDC via the PSM) deposited into the USDS Savings Rate. The yields are similar but not identical - the USDS rate may have slightly different mechanics or rates. Both can be used as collateral in Spark/Aave and are interchangeable as savings vehicles. USDS is Spark's preferred stablecoin for cross-chain liquidity, which is why sUSDS is also widely used in Balancer pools and other DeFi venues.
What historical APY has sDAI achieved, and has it been consistent?
The DSR has varied significantly over time. During 2020-2021 crypto boom periods it reached as high as 12%+ when MakerDAO surplus was large. During bear markets it dropped to 3-4%. Post-Sky rebranding in 2023-2024, rates stabilized in the 5-7% range. As of mid-2026, the DSR sits around 6.5%, which is competitive with most alternative stablecoin savings products. The key insight is that the DSR rate is driven by MakerDAO's revenue, which is correlated with crypto market activity - higher ETH prices and more CDP activity means more surplus to distribute. The rate is governance-adjustable, so it can be raised to attract deposits when competition for stablecoin capital increases.
Can I use sDAI as collateral to borrow on Aave or other protocols?
Yes - sDAI is an ERC-4626 vault token, which means it is recognized as a standard ERC-20 by most major lending protocols. Aave V3, Morpho, and other protocols that support ERC-4626 tokens allow sDAI to be used as collateral. This creates a powerful strategy: deposit DAI -> receive sDAI -> deposit sDAI as collateral -> borrow stablecoins -> deploy borrowed stablecoins for yield. This 'loop' lets you earn the DSR yield while also accessing leverage. The risk: if sDAI drops in value (depegs) or if your health factor falls too low, you can be liquidated.