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 Fees Methodology

## 1. Overview

Fees measures the total value paid by users to use Sky across all product lines. Economic value is generated through stability fees charged on borrowed USDS and DAI, liquidation penalties when collateral is seized, trading fees from Peg Stability Modules (PSMs), and interest earned from Direct Deposit Modules (D3Ms) and Real World Assets (RWAs). These diverse fee streams are aggregated to reflect the total interest and service fees generated by the protocol.

## 2. Data sources

- **Blockchain events**: `Bark` events from `Dog` contracts, `Bite` events from `Cat` and `CatV0` contracts, `Fees` events from `D3MHub` contracts, `Toss` events from various JAR contracts, ERC-20 `Transfer` events for USDS, and `drip`, `frob`, `grab`, `move`, `suck`, `mint`, and `burn` function calls from `Jug`, `Vat`, and DAI contracts, covering Ethereum
- **External data**: End-of-day token price feeds for USD conversion

## 3. Step-by-step calculation

### Component A: Stability fee calculation

- **Purpose**: Calculates interest fees charged on outstanding debt positions across all collateral types
- **Logic**: Rate changes are tracked from `Jug` contract `drip` function calls and debt position changes are identified from `Vat` contract `frob` and `grab` function calls. For each collateral type, a running total of outstanding debt (called `art`) is maintained. When stability fee rates are updated via `drip` calls, interest is calculated as the rate change multiplied by the outstanding debt before the rate change. Collaterals already handled by specialized mechanisms (D3M, RWA, or Sky star settlements) are excluded from this component to prevent double counting.
- **Key fields**: The `ilk` field identifies collateral types, `rate` field contains the stability fee rate, and `dart` field tracks debt changes

### Component B: Liquidation fee calculation

- **Purpose**: Captures fees earned when the protocol liquidates undercollateralized positions
- **Logic**: Two data streams are combined for this calculation. First, DAI flows to Sky's balance sheet address from system liquidation accounts are tracked, representing the value of seized collateral. Second, debt amounts sent to auction are tracked via `Dog` and `Cat` contract events, representing the debt being settled. The net difference (seized collateral value minus settled debt) represents liquidation fees earned by the protocol. Flows from DAO accounts, direct expense transactions, and system management operations are excluded.
- **Key fields**: The `amount` field from internal DAI transfers, `due` and `tab` fields from liquidation events representing debt amounts

### Component C: PSM trading fee calculation

- **Purpose**: Captures fees from Peg Stability Module trading activities
- **Logic**: PSMs allow users to exchange stablecoins for DAI/USDS at near-parity rates with small fees. PSM interactions are identified by filtering `Vat` contract `frob` function calls for PSM collateral types, which are then matched with DAI flows to Sky's balance sheet address from the same PSM accounts in the same transactions. These flows represent trading fees collected by the protocol.
- **Key fields**: The `collateral_id` field identifies PSM collateral types (containing "PSM-" prefix), and `amount` fields track the fee flows

### Component D: D3M interest calculation

- **Purpose**: Tracks interest earned from Direct Deposit Modules, particularly the AAVE D3M
- **Logic**: D3Ms automatically supply DAI to external protocols to earn yield. Two types of D3M interest are tracked: direct DAI flows from the AAVE D3M module to Sky's balance sheet address, and `D3MHub` contract `Fees` events that explicitly record interest payments. These represent yields earned on DAI supplied to external lending protocols.
- **Key fields**: The `amount` field from DAI flows and fee events

### Component E: RWA and JAR interest calculation

- **Purpose**: Records interest payments from Real World Assets and PSM JAR contracts
- **Logic**: Manual interest payments are recorded through predefined `Toss` events from various RWA and PSM JAR contracts. Each event represents an interest payment from real-world asset yields or PSM fee distributions. Multiple JAR contract events covering different RWA assets and PSM implementations are processed.
- **Key fields**: The `wad` field from `Toss` events contains interest amounts, and contract addresses identify the specific RWA or PSM source

### Component F: Sky star settlement calculation

- **Purpose**: Handles manual interest accruals for Sky Star allocator modules
- **Logic**: Sky star settlements are processed using manual monthly settlement cycles. Debt increases are identified via `grab` function calls from `Vat` contracts for specific allocator collaterals, including ALLOCATOR-SPARK-A, ALLOCATOR-BLOOM-A, and ALLOCATOR-OBEX-A. These debt positions are multiplied by the applicable interest rates, which are determined by parsing `drip` function calls from `Jug` contracts. To determine the net revenue retained by the protocol, USDS ERC-20 `Transfer` events involving specific subproxy addresses are parsed. Protocol revenue is calculated as the total debt increase minus settlement payments shared with partners, with adjustments applied for specific historical Spark settlements.
- **Key fields**: The `dart` field represents debt creation, `rate` field contains the applicable interest rate, and USDS `Transfer` amounts represent partner shares

### Component G: Spark interest allocation

- **Purpose**: Adjusts fee revenue to account for yield shared with Spark
- **Logic**: A specific portion of interest accrued on Spark-related collateral is identified and subtracted from the total fee revenue. This allocation is calculated based on predefined period totals and distributed proportionally across the daily interest accruals for the corresponding timeframe.
- **Key fields**: `collateral_id` (ALLOCATOR-SPARK-A) and `amount` representing the shared interest share

### Component H: Aggregation and USD conversion

- **Purpose**: Combines all fee components and normalizes them to USD
- **Logic**: All fee components are aggregated by day and product. Token addresses are mapped based on date, using the DAI address before 2024-12-01 and the USDS address thereafter. Amounts are normalized by decimal precision and multiplied by end-of-day asset prices. daily granularity is maintained with UTC day boundaries.
- **Key fields**: `token_address` (asset identification), `fees` (sum of component values)

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

Total value users pay to use a protocol (gross fees, user-paid fees).

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Fees

Fees

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