Overcollateralized borrowers deposit funds into Sky and receive DAI stablecoin.

Sky is a non-custodial stablecoin protocol built on Ethereum. Sky (previously MakerDAO) was founded by Rune Christensen and launched in 2015.

SKY tokenholders own and govern the protocol. They currently take all of the total interest and PSM fees paid by borrowers (revenue). Sky’s investors include a16z, Polychain, IOSG Ventures, etc.

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Sky | Fees and revenues breakdown

# Sky Earnings Methodology

## 1. Overview

Sky earnings are represented by the protocol's net profit, calculated as total revenue minus total expenses. This metric measures the financial performance of Sky (formerly MakerDAO), a decentralized stablecoin protocol that generates revenue primarily through stability fees on collateralized debt positions (CDPs), liquidation income, and trading fees from Peg Stability Modules. Standard accounting principles are followed, where earnings equal revenue minus all operating expenses and token incentives.

## 2. Data sources

- **Blockchain events**: `Bark` events from `Dog` contracts, `Bite` events from `Cat` contracts, `UpdateAddress` events from `ChainLog` contracts, and `Fees` events from `D3MHub` contracts, plus `drip`, `frob`, `grab`, `move`, and `suck` function calls from `Vat` contracts and ERC-20 `Transfer` events from DAI, USDS, and MKR contracts on Ethereum
- **External data**: End-of-day price feeds for DAI, USDS, MKR, and collateral assets

## 3. Step-by-step calculation

### Component A: Revenue calculation

- **Purpose**: Calculate total protocol revenue from all income sources
- **Logic**: Revenue is aggregated from four main income streams. First, stability fee income is calculated by tracking interest rate changes through `drip` functions from `Vat` contracts and applying rates to outstanding debt balances tracked via `frob` and `grab` functions. Separate interest accrual calculations are maintained for each collateral type. Second, proceeds from vault liquidations are captured by identifying DAI flows from liquidation contracts to Sky's balance sheet address through system DAI flow analysis. Third, PSM trading fees are identified by tracking DAI flows from PSM account addresses to the balance sheet during PSM-related transactions. Fourth, special income sources are included, such as Real World Asset interest payments through `Toss` events from `RWA` contracts, Direct Deposit Module interest from protocols like Aave, and Sky Star settlements. Sky Star revenue is specifically determined by comparing debt increases from `grab` function calls against USDS transfers to Star subproxy addresses. Spark's proportional share of interest accruals is calculated and subtracted from the total interest income during applicable settlement periods.
- **Key fields**: `collateral_id`, `interest_accrued`, `amount`, `balance_sheet_address`, `revenue_amount`

### Component B: Expense calculation

- **Purpose**: Calculate total protocol expenses including operating costs and token incentives
- **Logic**: Expenses are combined from operating expenses and token incentives (set to zero for Sky). Multiple categories of operating expenses are tracked through different mechanisms. Direct DAI expenses are identified through DAI mints and transfers to known expense accounts, including workforce payments to DAO multisig addresses, oracle gas costs to designated gas accounts, and other operational expenses. Savings Dai payments are tracked through DAI flows from the balance sheet to the DSR contract. Direct MKR token transfers from expense accounts to external recipients are captured for governance and operational costs. Liquidation expenses, including bad debt and liquidation losses, are tracked through unbacked DAI mints to non-system addresses. Returned workforce payments are also included as negative expenses when DAI is burned and returned to the balance sheet from team wallets.
- **Key fields**: `expense_type`, `destination_address`, `amount`, `payment`, `loss`

### Component C: Interest accrual mechanism

- **Purpose**: Calculate precise stability fee accruals for all collateral types
- **Logic**: Combined events from rate changes and debt changes are tracked to calculate interest accruals. Updated interest rates per collateral type are provided by rate change events from `drip` functions in `Vat` contracts. Changes in outstanding debt balances are tracked by debt change events from `frob` and `grab` functions. Cumulative debt balances are maintained per collateral type, and interest rate differentials are applied to outstanding balances when rates change. Interest accrued is calculated as the rate difference multiplied by the debt balance before the rate change. Collateral types that have separate interest tracking through RWA `Toss` events or D3M mechanisms are excluded to avoid double-counting.
- **Key fields**: `current_rate`, `previous_rate`, `art_before_event`, `cumulative_art`, `rate_difference`

### Final aggregation

- **Combining components**: Revenue and expense components are calculated independently and then combined using the standard earnings formula where earnings equal revenue minus expenses. Consistent daily aggregation and chain/product identifiers are maintained for each component to enable proper matching.
- **Currency conversion**: All amounts are converted to USD using end-of-day price feeds, with special handling for DAI which is treated as exactly $1.00 USD for periods before reliable price feeds were available. The same logic is used for USDS conversion given the 1:1 relationship.
- **Time aggregation**: All blockchain events are aggregated to daily boundaries using timestamp truncation to the day level, ensuring consistent time-based analysis across all revenue and expense sources.
- **Final calculation**: The final earnings value is calculated as the sum of all daily revenue sources minus the sum of all daily expenses, converted to USD and aggregated by timestamp, chain, and product identifiers. A forward-fill methodology is applied to ensure no gaps in the time series.

*This methodology was automatically generated by Token Terminal's methodology analyzer.*

Net profit (also profits, net income, profitability) — revenue remaining after subtracting expenses.

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