Sky — USDS & sUSDS

Contract Addresses

All addresses retrieved from the live Sky Chainlog and verified onchain. Snapshot block: 25939320 (September 9, 2026).

Tokens & Conversion Layer

Contract	Address	Type / Role
USDS (proxy)	0xdC035D45d973E3EC169d2276DDab16f1e407384F	UUPS/EIP-1967 proxy. Deployed 2024-09-02
USDS implementation	0x1923DfeE706A8E78157416C29cBCCFDe7cdF4102	Current implementation (USDS_IMP)
sUSDS (proxy)	0xa3931d71877C0E7a3148CB7Eb4463524FEc27fbD	UUPS/EIP-1967 proxy, ERC-4626. Deployed 2024-09-04
sUSDS implementation	0x4e7991e5C547ce825BdEb665EE14a3274f9F61e0	Current implementation (SUSDS_IMP)
DAI	0x6B175474E89094C44Da98b954EedeAC495271d0F	Sister stablecoin, 1:1 with USDS via converter
USDC	0xA0b86991c6218b36c1d19D4a2e9Eb0cE3606eB48	Circle USDC, gem for the LitePSM Wrapper
DAI-USDS Converter	0x3225737a9Bbb6473CB4a45b7244ACa2BeFdB276A	DAI_USDS. Atomic, fee-free 1:1 conversion
USDS Join	0x3C0f895007CA717Aa01c8693e59DF1e8C3777FEB	Mints/burns USDS against VAT internal balances. wards[MCD_PAUSE_PROXY] == 1; wards[USDS] == 1
USDS LayerZero OFT Adapter	0x1e1D42781FC170EF9da004Fb735f56F0276d01B8	LayerZero V2 OApp (OFT Adapter). Locks USDS for bridging to Solana and Avalanche only (~6.67M USDS locked). owner = PauseProxy, endpoint = 0x1a44…728c (LZ V2). Does NOT hold wards on USDS. See Cross-Chain Bridges
sUSDS LayerZero OFT Adapter	0x85A3FE4DA2a6cB98A5bdF62458B0dB8471B9f0f1	LayerZero V2 OApp for sUSDS. Avalanche peer configured but 0 sUSDS currently locked — sUSDS bridges via the native L2 token bridges instead. owner = PauseProxy. Does NOT hold wards on sUSDS

Cross-Chain Bridges (SkyLink)

USDS and sUSDS reach other chains through two independent bridge systems under the SkyLink umbrella — not a single LayerZero deployment. All bridge contracts are ERC-1967 proxies governed by MCD_PAUSE_PROXY (wards[PauseProxy] == 1), the same path as USDS itself. Addresses from the Sky chainlog, verified onchain at the snapshot.

1. Native canonical L2 token bridges (carry both USDS and sUSDS; lock-and-mint via each rollup's own bridge):

Chain	Token Bridge	L1 Escrow	Bridge tech
Base	0xA587…352A	0x7F31…9Ef3	OP Stack canonical bridge
Optimism	0x3d25…8057	0x4671…6C65	OP Stack canonical bridge
Unichain	0xDF05…81d2	0x1196…566A	OP Stack canonical bridge
Arbitrum	0x84b9…079E	0xA10c…9400	Arbitrum Nitro canonical gateway

L1 tokens are locked in the per-chain escrow and minted 1:1 on the L2 by the canonical rollup bridge. These do not use LayerZero, so they do not appear on LayerZero Scan. Escrow balances at the snapshot (onchain balanceOf): Base 2.59M USDS / 10.83M sUSDS, Arbitrum 99.8M USDS / 327.0M sUSDS, Optimism 0.010M USDS / 4.62M sUSDS, Unichain 0.010M USDS / 0.15M sUSDS. This is how sUSDS reaches Arbitrum (~327M sUSDS via the Arbitrum gateway), which is why sUSDS-on-Arbitrum is absent from LayerZero Scan. Arbitrum now holds ~97% of escrowed USDS and ~95% of escrowed sUSDS: on July 13, 2026 the Spark Liquidity Layer withdrew its Base, Optimism and Unichain positions back to its mainnet ALM Proxy (0x1601843c5E9bC251A3272907010AFa41Fa18347E) through the canonical bridges — e.g. 146.6M USDS out of the Base escrow and 192.0M sUSDS in the same block range.

2. LayerZero V2 OFT Adapters (USDS to Solana + Avalanche only; security analyzed in LayerZero V2 Dependency):

Token	OFT Adapter	Chains (peers)	Locked at snapshot
USDS	0x1e1D…01B8	Solana (EID 30168), Avalanche (EID 30106)	~6.67M USDS
sUSDS	0x85A3…f0f1	Avalanche (EID 30106)	0

The legacy DAI Teleport fast-withdrawal bridges (ARBITRUM_TELEPORT_BRIDGE, OPTIMISM_TELEPORT_BRIDGE, STARKNET_TELEPORT_BRIDGE) also exist in the chainlog but are DAI-era infrastructure and out of scope for USDS/sUSDS.

USDS-USDC PSM Stack

Contract	Address	Role
USDS LitePSM Wrapper	0xA188EEC8F81263234dA3622A406892F3D630f98c	WRAPPER_USDS_LITE_PSM_USDC_A. User-facing USDC↔USDS swap (buyGem / sellGem). Atomic. Deployed 2024-09-03
Underlying LitePSM (DAI-USDC)	0xf6e72Db5454dd049d0788e411b06CfAF16853042	MCD_LITE_PSM_USDC_A. Holds the swap logic. tin = 0, tout = 0, buf = 800,000,000 DAI (786.5M DAI held at snapshot)
USDC Pocket	0x37305B1cD40574E4C5Ce33f8e8306Be057fD7341	MCD_LITE_PSM_USDC_A_POCKET. Custodies the USDC reserves (~3.95B USDC at snapshot)
LitePSM Jar	0x69cA348Bd928A158ADe7aa193C133f315803b06e	MCD_LITE_PSM_USDC_A_JAR. Receives swap fees (currently zero)
LitePSM Mom (emergency halt)	0x467b32b0407Ad764f56304420Cddaa563bDab425	LITE_PSM_MOM. Authority = Chief, owner = PauseProxy. Lets the elected Chief hat instantly halt PSM swaps without the 48 h GSM delay
Emergency Halt Spell Factory	0xB261b73698F6dBC03cB1E998A3176bdD81C3514A	EMSP_LITE_PSM_HALT_FAB
CRON LitePSM Job	0x0C86162ba3E507592fC8282b07cF18c7F902C401	Keeper job that periodically tops up / fills the PSM buffer

Sky / MakerDAO Core (governs USDS, sUSDS, PSM)

Contract	Address	Role
MCD VAT (core ledger)	0x35D1b3F3D7966A1DFe207aa4514C12a259A0492B	The accounting nucleus of the Sky/Maker system. debt() ≈ 12.06B (rad-normalized)
MCD Vow (surplus / sin buffer)	0xA950524441892A31ebddF91d3cEEFa04Bf454466	Stability fee accumulator; receives the SSR drip differential
MCD Pot (DSR)	0x197E90f9FAD81970bA7976f33CbD77088E5D7cf7	DAI Savings Rate pot — predates sUSDS, parallel rate accumulator
MCD Pause	0xbE286431454714F511008713973d3B053A2d38f3	DSPause with delay() = 172800 seconds (48 hours GSM delay). owner = address(0); only spells elected by Chief can schedule
MCD PauseProxy	0xBE8E3e3618f7474F8cB1d074A26afFef007E98FB	The address governance executes as. Holds wards[USDS]==1, wards[sUSDS]==1, and is the upgrade authority for both proxies
MCD Chief (governance vote)	0x929d9A1435662357F54AdcF64DcEE4d6b867a6f9	DSChief. Continuous-approval voting over SKY token. Current hat() = 0x2bf5132EC2F21B079D7591c86D9817f1f18a2E05 (executed spell)
MCD Spot (price feed router)	0x65C79fcB50Ca1594B025960e539eD7A9a6D434A3	Price oracles for VAT collateral types
SKY governance token	0x56072C95FAA701256059aa122697B133aDEd9279	MCD_GOV. Total supply ~23.46B SKY
SPK token	0xc20059e0317DE91738d13af027DfC4a50781b066	Spark/Sky governance subsystem token (USDS Staking Rewards)
USDS Staking Rewards	0x173e314C7635B45322cd8Cb14f44b312e079F3af	REWARDS_USDS_SPK. Out-of-scope for this report but referenced by yvUSDS-1

Audits and Due Diligence Disclosures

Sky/MakerDAO is one of the most extensively audited DeFi protocols. Coverage for the in-scope contracts:

USDS Token

Auditor	Date	Scope	Report
ChainSecurity	Sep 4, 2024	USDS core (Endgame launch)	PDF
Cantina	Jul 3, 2024	USDS review	PDF
Cantina	Nov 24, 2023	NST (USDS predecessor)	PDF

sUSDS

Auditor	Date	Scope	Report
ChainSecurity	Sep 30, 2024	Savings USDS contract	PDF
Cantina	Sep 26, 2024	sUSDS review	PDF

LitePSM & Wrapper

Auditor	Date	Scope	Report
ChainSecurity	(Lite PSM)	Lite PSM audit	PDF
Cantina	(Lite PSM)	Lite PSM review	PDF

Endgame Stack (SKY token, LockStake, VoteDelegate, Flappers, Toolkit)

Auditor	Date	Scope
ChainSecurity	Sep 2024	Multiple Endgame contracts
Cantina	2024	Endgame Toolkit, Vote Delegate, Flappers
Sherlock public contest	Aug 5, 2024	MakerDAO Endgame → report

Legacy MCD (still in use — VAT, Vow, Pot, Pause, Chief)

Auditor	Coverage
Trail of Bits	MCD core
PeckShield	MCD core
Quantstamp	Liquidations 2.0
ChainSecurity	Multiple modules over the years
ABDK	Vote Delegate

Architecture complexity: USDS itself is a thin ERC-20 with permit + ERC-1271 (UUPS upgradeable). sUSDS is a thin ERC-4626 with a chi/ssr accumulator. The USDS-USDC swap path however involves a non-trivial chain: USDS ↔ DAI converter ↔ DAI Lite-PSM ↔ USDC Pocket. While each module is small, the chained dependency means a fault in any one of the four contracts halts USDS-USDC swaps.

Bug Bounty

• Sky on Immunefi (immunefi.com/bug-bounty/sky) — live since Feb 10, 2022, last updated Sep 4, 2026
• Maximum payout: $10,000,000 for critical smart-contract vulnerabilities. Minimum critical: $150K. Reward = 10% of funds at risk, capped at $10M
• 255 assets in scope, including USDS, sUSDS, LitePSM, DAI-USDS Converter, Chief, Pause, VAT
• Proof-of-concept required for all severities. Payouts in DAI or USDS at $1:1

Safe Harbor (SEAL)

• Sky is not listed on the SEAL Safe Harbor registry at the time of writing.

Historical Track Record

• USDS contract deployed: September 2, 2024 (tx 0xdf7d4ba4…b21c) — ~24 months in production
• sUSDS deployed: September 4, 2024 (tx 0xe1be00c4…2c00)
• LitePSM Wrapper deployed: September 3, 2024 (tx 0x43ddae74…8585)
• Underlying MakerDAO system: live since December 2017 (Multi-Collateral DAI) — ~8.75 years. Single-Collateral DAI launched November 2017.
• TVL growth (USDS, DefiLlama stablecoin id 209): $98.5M on launch day → ~$6.64B at the September 9, 2026 snapshot (cross-chain); ~$6.65B on Ethereum mainnet by raw ERC-20 totalSupply()
• Sky Lending TVL (DefiLlama): ~$5.51B (Ethereum-only)
• sUSDS adoption: ~4.67B USDS locked in sUSDS — about 70% of mainnet USDS supply is staked in the savings vault, indicating very heavy "yield seeker" capture. A further ~209M USDS sits in the newer stUSDS staking module (0x99CD4Ec3f88A45940936F469E4bB72A2A701EEB9), assessed separately in sky-stusds.md
• Peg history (USDS, past 365 days via CoinGecko daily series):
  • Min: 0.9975 (October 11, 2025) — market-wide stablecoin stress; the hourly series bottoms at 0.9947 on October 6, 2025, still under 0.6% off peg
  • Max: 1.0011 (February 23, 2026)
  • Latest: 0.9999 (within peg)
• Past security incidents (relevant to USDS path):
  • Black Thursday (March 12, 2020) — DAI/MCD: Cascading ETH price crash combined with mempool congestion caused some liquidation auctions to be won at $0 bids. ~$6M of system shortfall was absorbed by minting MKR to recapitalize. Affected users were later partly compensated via DAO vote. The liquidation system was redesigned (Liquidations 2.0, audited by Quantstamp). USDS did not exist yet
  • USDC depeg (March 11, 2023): Circle's USDC briefly traded as low as ~$0.88 following Silicon Valley Bank exposure. DAI traded down with it (~$0.88 floor) because of the USDC PSM dependency. Sky/Maker responded by widening PSM fees temporarily and accelerating diversification into RWAs. USDS would inherit the same USDC peg exposure today — a USDC depeg is the largest non-bug peg risk to USDS
  • No USDS/sUSDS/LitePSM-specific incidents since their respective launches (~24 months at this snapshot)
• TVL trend: USDS remains multi-billion scale and has held a tight peg. Cross-chain supply has contracted steadily through 2026: ~8.84B (May 2026) → ~8.19B (June 2026) → ~6.64B (September 2026), a ~19% decline over the last quarter, with sUSDS totalAssets() falling from ~5.88B to ~4.67B over the same period. The contraction is gradual and continuous rather than event-driven; no forced unwind, redemption failure, or USDS-specific incident was identified, and the LitePSM absorbed the outflow without fee changes or a halt.
• Cross-chain repatriation (July 13, 2026): the Spark Liquidity Layer withdrew its Base, Optimism and Unichain USDS/sUSDS positions to mainnet through the canonical rollup bridges, cutting native-escrow USDS from ~448M to ~102M and escrowed sUSDS from ~812M to ~343M. This was an allocator rebalance executed over the ordinary bridge path, not a bridge failure; escrow contracts, wards, and bridge ownership were unchanged.

Funds Management

How USDS Is Issued

USDS has no dedicated CDP system. Every USDS in existence has come from one of the following channels:

1. DAI → USDS via the DAI-USDS Converter (0x3225737a…F276A)

   • User sends n DAI → receives n USDS, no fee, single transaction
   • Implementation: pulls DAI to itself, then calls usdsJoin.exit() to mint USDS to the caller
   • Reverse direction is symmetric and identical
   • Implication: USDS is fungible with DAI at protocol level. Any DAI holder is a latent USDS arbitrageur

2. USDC → USDS via the LitePSM Wrapper (0xA188EEC8…0f98c)

   • User calls sellGem(usr, gemAmt): wrapper pulls USDC → calls underlying LitePSM sellGem() → DAI minted to wrapper → wrapper calls daiUsds.daiToUsds() → USDS delivered to user
   • Reverse (buyGem(usr, gemAmt)): user sends USDS → converter swaps to DAI → LitePSM buyGem() exchanges DAI for USDC out of the Pocket → USDC delivered to user
   • Fees: tin = tout = 0 (zero). The LitePSM buf (800M DAI) acts as a hot supply buffer so user swaps do not have to wait for VAT bookkeeping. 786.5M DAI was held against that target at the snapshot
   • Capacity:
     • USDC → USDS direction: bounded by buf (800M DAI per refill cycle, keeper-replenished) and ultimately by the Sky governance-set line for the PSM ilk in the VAT
     • USDS → USDC direction: bounded by the Pocket USDC balance (currently ~3.95B USDC)
   • Atomic: yes — entire path completes in one transaction

3. Prime allocator vaults — the largest issuance channel after the PSM. Sky governance grants an allocator (a "Prime" or "Star") a VAT ilk with a debt ceiling; the allocator draws USDS and deploys it into onchain lending, tokenized treasuries, and credit strategies. At the snapshot, per-ilk debt (Art × rate from MCD_VAT.ilks): Spark (ALLOCATOR-SPARK-A) ~$3.06B, Grove (ALLOCATOR-BLOOM-A) ~$2.50B, Obex (ALLOCATOR-OBEX-A) ~$403M, plus ALLOCATOR-PRYSM-A (~$25.0M) and ALLOCATOR-GROVE-A (~$16.6M); Keel (ALLOCATOR-NOVA-A), ALLOCATOR-PATTERN-A and ALLOCATOR-INTERVAL-A are at 0. Together ~$6.01B, ~49.8% of VAT debt. What backs these positions is discussed under Collateralization

4. D3M (Direct Deposit Module) — Sky governance can mint USDS directly to lending markets (Spark, Aave-Lido) up to per-market debt ceilings, where the USDS is borrowed by users. At the snapshot the DIRECT-SPK-AAVE-LIDO-USDS ilk carries zero debt and the Spark Aave-Lido USDS pool (DIRECT_SPK_AAVE_LIDO_USDS_POOL) holds 0 USDS, so this channel is dormant

5. MakerDAO/Sky CDPs (ETH-A, ETH-B, ETH-C, wstETH-A, wstETH-B, WBTC-C, RWA- vaults, LockStake)* — borrowers post collateral, draw DAI (which they can then swap to USDS via the converter). These vaults are over-collateralized at the ilk level (typical liquidation ratios 145–170% for crypto, 100%+ for RWAs). Combined crypto-CDP and LockStake debt is now ~$547M, ~4.5% of VAT debt

All channels ultimately settle through MCD_VAT (0x35D1b3F3…492B), which at the snapshot reports debt() in rad units → ~12.06B normalized debt. The corresponding DAI + USDS issued supply (Ethereum mainnet) is ~4.58B + ~6.65B ≈ ~11.22B, and the difference represents stability-fee accrual and surplus in MCD_VOW.

Accessibility

Operation	Permission	Atomic?	Fees	Limits
USDC → USDS (LitePSM Wrapper)	Permissionless	Yes (1 tx)	0	buf = 800M DAI per fill; capped by PSM line in VAT
USDS → USDC (LitePSM Wrapper)	Permissionless	Yes (1 tx)	0	Pocket USDC balance (~3.95B)
DAI ↔ USDS (Converter)	Permissionless	Yes (1 tx)	0	None — direct mint/burn through USDS_JOIN
Deposit USDS → sUSDS	Permissionless	Yes (1 tx)	0	None (sUSDS is unbounded ERC-4626)
Withdraw USDS ← sUSDS	Permissionless	Yes (1 tx)	0	None
Mint USDS directly	Wards-gated — only contracts in USDS.wards == 1 (currently USDS_JOIN and PauseProxy)	—	—	Only PauseProxy can grant new wards; new ward requires a passed Chief spell + 48 h GSM delay

There is no whitelist on swaps, no KYC requirement, no cooldown, and no withdrawal queue for sUSDS. All flows are single-transaction.

Collateralization

USDS does not have a clean "this collateral backs this token" picture — it inherits the full Sky/MakerDAO collateral book. Per-ilk debt below is Art × rate read from MCD_VAT.ilks(ilk) at the snapshot block, against total VAT debt() of ~12.06B:

Class	Ilk(s)	Debt at snapshot	Share of VAT debt	Role in backing
USDC PSM (LitePSM)	LITE-PSM-USDC-A	~$4.73B	39.3%	Pocket holds ~3.95B USDC 1:1 plus ~786.5M DAI in the buf. Largest single backing line and the source of USDS-USDC swap capacity
Prime allocator vaults	ALLOCATOR-SPARK-A (~$3.06B), ALLOCATOR-BLOOM-A / Grove (~$2.50B), ALLOCATOR-OBEX-A (~$403M), ALLOCATOR-PRYSM-A (~$25.0M), ALLOCATOR-GROVE-A (~$16.6M), ALLOCATOR-NOVA-A / Keel and three others (0)	~$6.01B	49.8%	USDS drawn by allocators and deployed into onchain lending, tokenized treasuries, and credit strategies. Backing quality is the quality of those downstream positions, not of a liquidatable onchain CDP
Crypto-backed CDPs	ETH-A, ETH-B, ETH-C, WSTETH-A, WSTETH-B, WBTC-A, WBTC-B, WBTC-C	~$388M	3.2%	Over-collateralized loans, ~145–170% liquidation ratio. Volatile but onchain-liquidatable
LockStake (SKY staked)	LSEV2-SKY-A	~$159M	1.3%	Borrow against locked SKY — governance-token-backed, reflexive
Legacy RWA vaults	RWA002-A (New Silver, ~$23.7M), RWA004-A (Harbor Trade, ~$1.5M), RWA005-A (FortunaFi, ~$2.8M), RWA009-A (HVB, ~$49.6M)	~$77.6M	0.6%	Offchain custody / credit risk; the residual of the original RWA program
System unbacked debt (vice)	not an ilk — MCD_VAT.vice(), all attributed to MCD_VOW	~$690.1M	5.7%	The sin side of the ledger. Structurally generated by savings accrual: sUSDS.drip() and Pot.drip() call vat.suck(vow, …) to mint SSR/DSR interest, which creates unbacked debt at the Vow. See the Vow position below
D3M (Spark/Aave Direct Deposit)	DIRECT-SPK-AAVE-LIDO-USDS and four legacy D3M ilks	0	0%	Dormant at the snapshot
GUSD-A / PAX-A PSMs	PSM-GUSD-A, PSM-PAX-A	dust (~$0.57 / ~$0.38)	0%	Effectively retired; no longer a meaningful backing or swap route

The table reconciles exactly against the VAT identity debt = Σ(Art × rate) + vice: summing all 35 registered ilks gives $11,367,876,592.81, plus vice() of $690,101,841.19, equals debt() of $12,057,978,434.00 to the cent.

The Vow's net position is a deficit, not a surplus. At the snapshot the Vow holds $633.2M of surplus DAI (vat.dai(vow)) against $690.1M of unbacked debt (vat.sin(vow), all of the system's vice), leaving a net −$56.9M. Of that debt, $228.2M is queued for flog (vow.Sin()) and none is on auction (vow.Ash() = 0). The legacy surplus-auction path is disabled — vow.bump() = 0 and vow.hump() = 2^256−1 make flap() unreachable — so surplus is handled outside the Vow's own auction machinery. Observatory books the same −$56,940,271 as its "Operating Cash Balance" liability line.

Cutting the same book by underlying asset rather than by ilk, SkyEco / Observatory's USDS collateral-backing API reports at 2026-09-09 10:50 UTC: stablecoins ~$4.89B, onchain crypto lending ~$2.12B, short-duration Treasury bills ~$1.33B, OTC crypto lending ~$956M, AAA corporate debt ~$496M, legacy RWA ~$77.6M, private credit ~$20.7M, basis trade ~$20.4M. Offchain or tokenized credit exposure therefore totals ~$2.90B — ~24.0% of VAT debt and ~29.3% of Observatory's ~$9.91B loan-coverage backing. Maintenance-coverage backing is ~$10.58B and total collateral value ~$15.81B.

System-level overcollateralization is not directly readable from a single onchain call — it requires aggregating per-ilk Art × rate (debt) and ink × oracle price × liquidation-ratio (locked collateral value). Observatory's balance-sheet aggregate reports ~$11.49B assets against ~$11.42B liabilities for the September 2026 snapshot — a positive but thin ~$68M margin. Note that this is a wider accounting frame than the Vow: it counts the $157M Sky Capital Buffer and other reserves as assets, which is why it shows a small positive margin while the Vow itself is $56.9M net negative. Onchain VAT debt is ~12.06B against ~11.22B Ethereum DAI + USDS issued supply.

Key takeaway for the USDS holder: the collateral mix is far better than a fiat-only stablecoin (no single banking dependency), but worse than a pure crypto-collateralized model — direct crypto-CDP backing is now only ~3.2% of VAT debt, and roughly half of issuance sits in Prime allocator vaults whose assets are a mix of onchain lending, tokenized treasuries, and offchain credit. For a USDC→USDS→sUSDS user specifically, the relevant backing slice is overwhelmingly the USDC PSM pocket (~3.95B USDC), with the rest of the Sky book acting as a secondary solvency buffer. As long as the PSM peg arbitrage works, USDS effectively trades at the lower of peg(DAI) and peg(USDC).

Provability

• sUSDS exchange rate: convertToAssets(shares) is fully onchain via chi accumulator and ssr rate. Continuous accrual is a pure function of ssr and elapsed time since rho (last drip timestamp). At snapshot: chi = 1.1090, ssr = 1.0000000011214…, rho = 1788950867 (2026-09-09)
• System debt (VAT): Readable onchain via MCD_VAT.debt() and per-ilk urns(ilk, urn), ilks(ilk).Art, ilks(ilk).rate. Full reserve audit requires aggregating dozens of ilks but is mechanically possible from public RPC
• USDC PSM Pocket: USDC.balanceOf(pocket) is publicly callable — at snapshot returns 3.95B USDC
• RWA / offchain-credit backing: Less transparent. Legacy RWA00x ilks total only ~$77.6M at the snapshot, but broader Observatory categories with offchain/tokenized credit exposure total ~$2.90B: short-duration Treasury bills (~$1.33B), OTC crypto lending (~$956M), AAA corporate debt (~$496M), legacy RWA (~$77.6M), private credit (~$20.7M), and basis trade (~$20.4M). The underlying assets sit at TradFi custodians or offchain credit venues, so this remains the least directly verifiable slice of backing. Because ~49.8% of VAT debt is drawn by Prime allocator vaults, the ilk-level view alone does not reveal what backs it — that requires trusting Observatory's look-through into each allocator's positions
• Can admins mint USDS out of thin air? Yes, by definition — Sky governance (PauseProxy) can usds.rely(addr) to grant wards = 1 to any address, which then has unrestricted minting via the underlying contract. This change must go through Chief vote + 48 h GSM delay. At the snapshot, the only non-governance ward is USDS_JOIN, which itself only mints in response to a corresponding vat.suck / vat.move settled through valid collateral

Liquidity Risk

Primary Exit Path: LitePSM Wrapper (USDS → USDC)

• Direct 1:1 redemption with zero fee. Atomic in a single transaction
• Capacity (USDS → USDC): bounded by USDC balance in the Pocket = 3,948,440,886 USDC at snapshot. That is ~3.95B exit capacity in a single tx with 0% slippage
• No cooldown, no queue, no per-user cap. Anyone holding USDS can swap to USDC by calling WRAPPER_USDS_LITE_PSM_USDC_A.buyGem(usr, gemAmt)
• Reverse direction (USDC → USDS) is also atomic and zero-fee, bounded by the buf (800M DAI) per refill cycle. A CRON keeper job (CRON_LITE_PSM_JOB) regularly refills the buffer; under heavy demand the buffer can be refilled multiple times per day

Secondary Path: DAI-USDS Converter

• Atomic 1:1 conversion of USDS → DAI (or DAI → USDS), zero fee
• Unbounded — settles directly through USDS_JOIN and DAI_JOIN against MCD_VAT
• Useful when a user wants to access DAI-paired DEX liquidity (which is much deeper than direct USDS pairs)

Tertiary: sUSDS ERC-4626 Withdrawal

• redeem(shares, receiver, owner) returns USDS at the current chi rate, atomic, zero fee. Underlying USDS is minted on-demand via USDS_JOIN — there is no per-block withdrawal cap

DEX Liquidity

USDS DEX liquidity on Ethereum mainnet is meaningful but not the primary exit path — most large flows route through the PSM, not AMM pools. Top Ethereum pools touching USDS or sUSDS, from DefiLlama yields at snapshot:

Project	Pool	TVL ($)
Sky Lending	sUSDS	~$4.67B
Centrifuge	USDS	~$775M
SparkLend	USDS (two markets)	~$592M + ~$276M
Sky Lending	stUSDS	~$209M
Sky Lending	USDS	~$164M
Uniswap V4	PYUSD-USDS	~$100M
f(x) Protocol	fxUSD stability pool (USDS)	~$76M
Morpho Blue	sUSDS market	~$63M
Uniswap V4	USDT-USDS	~$50M
Morpho Blue	Sky Money USDS Flagship	~$40M
Uniswap V4	RLUSD-USDS	~$20M

Direct USDS-USDC DEX liquidity is small (no Uniswap/Curve USDS-USDC pool sits above $10M at the snapshot). This is because the PSM Wrapper provides zero-fee 1:1 USDC↔USDS swaps, so DEX routes cannot meaningfully out-price the PSM — there is no incentive for LPs to build deep USDS-USDC pools. For any reasonable Yearn integration size, the PSM (with ~$3.95B Pocket depth) is the dominant exit path; DEX liquidity is a secondary concern only at the multi-hundred-million-dollar scale.

Cross-Chain Liquidity

USDS and sUSDS reach other chains via two separate bridge systems (full contract list in Cross-Chain Bridges):

1. Native canonical L2 token bridges (SkyLink) — Base, Optimism, Unichain (OP Stack) and Arbitrum (Arbitrum Nitro gateway). L1 tokens are locked in a per-chain escrow and minted 1:1 on the L2 by that chain's own canonical bridge. These carry the bulk of cross-chain supply: ~102M USDS and ~343M sUSDS across the four escrows at the snapshot, ~97% and ~95% of it in the Arbitrum escrow after the July 2026 Spark repatriation. Security rests on each rollup's canonical bridge (battle-tested L1↔L2 messaging) plus PauseProxy governance; L2→L1 exits inherit the chain's challenge window (up to ~7 days on optimistic rollups). No LayerZero / DVN trust assumption applies to these chains.
2. LayerZero V2 OFT Adapters — USDS to Solana + Avalanche only (~6.67M USDS locked); the sUSDS OFT adapter currently locks 0. This is the only Sky bridge that appears on LayerZero Scan (Ethereum + Solana + Avalanche) and the only one carrying third-party-verifier (DVN) trust — analyzed in LayerZero V2 Dependency.

Onchain verification confirms neither the OFT adapters nor any native bridge holds wards on USDS/sUSDS — none can mint the underlying token; all lock-and-mint against escrowed supply, and all are owned/warded by PauseProxy.

In total ~109M USDS (and ~343M sUSDS shares, ~$380M at chi) sits outside Ethereum mainnet — matching DefiLlama's per-chain balances (Arbitrum ~99.8M, Solana ~6.7M, Base ~2.6M, Optimism/Unichain/Avalanche dust). For an Ethereum-mainnet-only Yearn strategy, cross-chain bridge exposure is operationally none.

Historical Liquidity Under Stress

• During the October 2025 stablecoin stress event (USDS hourly low 0.9947 on October 6, 2025), USDS-USDC swaps via the PSM remained available throughout — the peg deviation was driven by secondary AMM markets, not by Pocket depletion
• LITE_PSM_MOM.halt(...) has never been invoked. Full event-log scan of 0x467b32b0407Ad764f56304420Cddaa563bDab425 returns exactly 4 events since deployment, none of which are Halt(address indexed psm, Flow indexed what) (topic 0x495feb065552316a79c594a4305afbd632955a68b2c6f65ad8b2f62d150fea92). The 4 events are 2× SetOwner and 2× SetAuthority from initial deployment (final owner = PauseProxy, final authority = Chief). The emergency-halt channel exists but has never been used

Centralization & Control Risks

Governance

Sky uses token-weighted continuous-approval voting rather than a multisig:

Stage	Mechanism	Address
Vote	SKY holders lock SKY in Chief and approve a candidate "spell" address. Highest-voted spell becomes the hat	MCD_ADM = 0x929d…6f9
Execute	The hat schedules transactions on MCD_PAUSE (DSPause) which enforces a 48-hour delay	MCD_PAUSE = 0xbE28…38f3, delay = 172800
Apply	After the delay, MCD_PAUSE calls into MCD_PAUSE_PROXY which executes the spell's actions (e.g., changing ssr, granting wards, upgrading USDS implementation)	MCD_PAUSE_PROXY = 0xBE8E…aFF52
Emergency halt	LITE_PSM_MOM can halt PSM swaps without the 48 h delay if the current Chief hat authorizes it (authority = Chief, owner = PauseProxy)	LITE_PSM_MOM = 0x467b…b425

Strengths:

• Token-weighted vote in Chief is fully on-chain and continuously contestable — voters can re-deposit and shift weight at any time, providing fast response to malicious spells during the 48 h delay
• The 48 h MCD_PAUSE.delay() is shorter than the typical 7-day timelock assumed in the rubric (a score-1 criterion), but it has historically been sufficient for Sky's stakeholders to react and rotate the hat if needed. It can only be reduced through a passed spell that itself takes 48 h
• MCD_PAUSE has owner = address(0) — no admin shortcut
• Upgrades to USDS/sUSDS proxies require the PauseProxy to call upgradeToAndCall on the implementation. Same 48 h delay applies
• No EOA holds direct admin powers on USDS, sUSDS, LitePSM, or the Pocket. All sensitive wards mappings point to PauseProxy or other audited Sky contracts

Weaknesses:

• SKY token concentration risk: voting weight is proportional to SKY locked. Onchain at the snapshot:
  • Total SKY locked in Chief: 7,172,789,081 SKY (~30.6% of the 23.46B SKY supply)
  • Approvals for the current hat (0x2bf5…2E05): 7,051,808,326 SKY (~30.1% of total supply; ~98.3% of locked SKY votes for the hat)
  • Sky's current-hat API and supporter API show high supporter concentration for the current hat. The largest supporter, cloaky, has 3.18B SKY (45.07% of hat approvals). The top 3 supporters have ~90.6% of hat approvals; the top 5 have ~98.0%. No single supporter currently exceeds 50%, but two aligned delegates can exceed a majority of current-hat approvals.

Rank	Supporter	Vote-delegate address	SKY approving current hat	% of hat approvals
1	cloaky	0x0f23…cc86	3,178,061,490	45.07%
2	BLUE	0x173a…9558	2,084,056,374	29.55%
3	Bonapublica	0xfc48…753d	1,130,024,047	16.02%
4	Tango	0x550e…72ad	427,461,785	6.06%
5	aegisD	0xd260…bf5e	89,304,798	1.27%
6	Max Staking Yield	0xff76…ee2f	72,160,815	1.02%
7	PBG	0x5552…b850	48,416,057	0.69%
8	WBC	0x4bed…ae90	20,569,425	0.29%
9	Shadow Delegate	0xb263…bc23	1,753,534	0.02%

• 48 h delay is at the low end for upgradeable stablecoin systems (compared to 7-day on many newer protocols). A determined attacker with sufficient SKY could theoretically push through harmful changes if they can hold the hat for 48 h without being out-voted
• Privileged role: PauseProxy can mint USDS to anyone by granting wards = 1 to a new address. This is the same "governance can do anything" property all DAO-controlled stablecoins share. The 48 h delay + onchain visibility is the only constraint

Programmability

Function	Onchain?	Notes
Mint / burn USDS via USDS_JOIN	Yes, programmatic	Settled through VAT; cannot exceed VAT debt-ceiling parameters
DAI ↔ USDS conversion	Yes, programmatic	Pure routing in DAI_USDS contract
USDC ↔ USDS via LitePSM Wrapper	Yes, programmatic	Wrapper routes through DAI LitePSM. PSM pocket is read directly
sUSDS chi accumulator	Yes, programmatic	Continuous accrual via ssr; drip() is permissionless
ssr rate parameter	Governance-set	Changed by Chief spell + 48 h delay
PSM tin/tout/buf parameters	Governance-set	Same flow
Halting the PSM	Authority-gated (LitePSM Mom; immediate if hat authorizes)	Used in emergency only
Upgrading USDS / sUSDS implementations	Governance-set	48 h delay

System operations are dominated by programmatic onchain logic. The governance touchpoints (rate setting, parameter tuning) are deterministic and visible; there is no off-chain keeper that drives the price or accrual.

External Dependencies

Dependency	Used By	Criticality	Notes
Circle / USDC	LitePSM Wrapper, Pocket holds 3.95B USDC	Critical for USDS-USDC swap path. A USDC freeze/blacklist on the Pocket or a USDC depeg would directly impair USDS-USDC convertibility	Circle has blacklisted addresses before (TornadoCash, OFAC sanctions). The Pocket has not been blacklisted but is on-chain visible and bounded by Circle's policy
DAI / MakerDAO core (VAT, Join, Pot, Pause, Chief)	All conversion paths	Critical — USDS shares the VAT with DAI. A bug in any MCD core contract impairs USDS	8+ years of production with documented incidents (Black Thursday) but no exploit since
RWA / offchain-credit custodians	Legacy RWA00x ilks are ~0.6% of VAT debt; broader tokenized treasury / corporate credit / private-credit / OTC credit backing is ~24.0% of VAT debt, most of it reached through the Prime allocator vaults	High but indirect for the USDC→USDS user	Custodians and credit venues include TradFi/tokenized-credit issuers such as BlackRock BUIDL, Janus Henderson Anemoy/Centrifuge, Securitize, Maple, Anchorage, and legacy RWA vault parties. Failures propagate to system solvency but do not directly impair PSM swap atomicity
LayerZero V2 (USDS_OFT)	Cross-chain bridging to Solana + Avalanche only (~$6.67M); EVM L2s use native bridges, not LayerZero	Nil for Ethereum-mainnet-only user; Low for cross-chain users	OFT channels verified to require 2 independent DVNs (LayerZero Labs + Nethermind) — not the single-DVN config exploited at KelpDAO. See expanded section below
Native L2 canonical bridges (Base/Optimism/Unichain OP Stack; Arbitrum Nitro)	SkyLink cross-chain transport for USDS + sUSDS (~102M USDS + ~343M sUSDS)	Nil for Ethereum-mainnet-only user	ERC-1967 proxies governed by PauseProxy; security inherits each rollup's canonical bridge. Not LayerZero
Chainlink / Oracle price feeds (MCD_SPOT)	Sets per-ilk liquidation prices for collateral CDPs	Indirect — bad oracle → bad liquidations → solvency hit	Mature oracle setup with multi-source feeds
LITE_PSM_MOM emergency halter	Can pause USDC-USDS PSM swaps instantly	Trust dependency: the elected hat can halt PSM at will	Visible onchain; governance can override

LayerZero V2 Dependency

What LayerZero Is: LayerZero is a cross-chain interoperability protocol that provides a generic messaging layer between blockchains. It uses a modular verification architecture where each OApp (Omnichain Application) configures one or more DVNs (Decentralized Verifier Networks) to attest to cross-chain messages. When a message receives sufficient attestations (as configured by the OApp's security settings), the destination contract executes the payload.

What Sky Uses It For: Sky uses LayerZero only for chains that lack a native canonical bridge to Ethereum — currently Solana and Avalanche. USDS deploys an OFT Adapter (Omnichain Fungible Token) on Ethereum (0x1e1D…01B8) that locks USDS and authorizes minting of a corresponding OFT on those chains (~6.67M USDS locked at the snapshot). The sUSDS OFT adapter (0x85A3…f0f1) has an Avalanche peer configured but currently locks 0. The EVM L2s — Base, Arbitrum, Optimism, Unichain — do NOT use LayerZero; they use native canonical rollup bridges (see Cross-Chain Bridges). The OFT adapters are owned by PauseProxy; changes require Chief vote + 48 h GSM delay.

KelpDAO Incident Context (April 18, 2026): On April 18, 2026, the KelpDAO rsETH bridge — also built on LayerZero — was attacked by the DPRK-affiliated TraderTraitor threat actor, resulting in a loss of ~$292M. The attacker socially engineered a LayerZero Labs developer, pivoted into LayerZero's cloud environment, and poisoned internal RPC nodes to forge DVN attestations for a malicious cross-chain message. The critical vulnerability was that the affected OApp had a single-verifier configuration — it relied on the LayerZero Labs DVN alone without requiring a second, independent DVN to confirm. The forged attestation was therefore sufficient to unlock rsETH on the destination chain.

Impact on Sky:

• No other OApps or channels were compromised — the attack was specific to the KelpDAO OApp's configuration.
• LayerZero Labs changed operating stance post-incident: the LayerZero Labs DVN now refuses to sign as the sole required attestor on any channel. It enforces a baseline security configuration requiring at least one additional independent verifier.
• Sky's OFT DVN configuration is verifiable onchain and is a secure multi-DVN setup. Querying the LayerZero V2 endpoint (0x1a44…728c) via the ULN libraries (getUlnConfig) at the snapshot, every Sky OFT channel — USDS↔Solana, USDS↔Avalanche, sUSDS↔Avalanche, on both send and receive paths — uses a custom config requiring 2 independent DVNs (requiredDVNCount = 2, 0 optional): the LayerZero Labs DVN (0x589d…236b) and the Nethermind DVN (0xa59B…0BA5), with 12 (Avalanche) / 32 (Solana) block confirmations. This is a 2-of-2 requirement — structurally the opposite of the single-DVN configuration that enabled the KelpDAO loss. A single compromised or forging DVN cannot finalize a Sky cross-chain message; both must independently attest.
• Risk assessment for mainnet users: The LayerZero dependency is nil for users who hold USDS/sUSDS only on Ethereum mainnet and never bridge. The OFT adapter on Ethereum has no mint authority over the underlying token — it locks USDS 1:1 via standard OFT mechanics. A LayerZero exploit on a remote chain could theoretically mint unbacked OFT tokens on that chain, but could not create USDS on Ethereum mainnet. Mainnet USDS supply integrity is protected by the wards system on the USDS token itself (only USDS_JOIN and PauseProxy hold wards == 1).
• Risk assessment for cross-chain users: Only Solana and Avalanche USDS holders carry any LayerZero dependency at all, and it is low: because Sky's channels require two independent DVNs, the single-DVN forgery vector used against KelpDAO does not apply. The residual tail risk (simultaneous compromise of both DVNs) is further mitigated by Sky governance's ability to pause/upgrade the OFT adapter via PauseProxy. USDS/sUSDS holders on the EVM L2s do not depend on LayerZero at all — their bridges are native canonical rollup bridges.

Mitigating factors specific to Sky:

• Sky governance controls the OFT adapters via PauseProxy and can upgrade or pause them through the same Chief + 48 h GSM delay used for all other protocol changes.
• LayerZero-bridged supply is tiny: ~$6.67M of USDS (Solana + Avalanche), ~0.1% of mainnet supply. The larger cross-chain supply (~102M USDS + ~343M sUSDS) rides native canonical bridges, not LayerZero.
• Sky's channels already use a verified 2-DVN configuration (LayerZero Labs + Nethermind), so they were not exposed to the single-DVN vector even before LayerZero Labs' post-KelpDAO policy enforcing multi-DVN baselines.

Quality: dependencies are predominantly blue-chip (Circle, MakerDAO core, Chainlink). The most material concentration is the USDC dependency: the LitePSM ilk is ~39.3% of VAT debt, of which the on-chain USDC reserve itself is ~32.7%, and any USDS holder who plans to exit to USDC implicitly trusts Circle.

Operational Risk

• Team: Sky Foundation (formerly MakerDAO) — established 2017, publicly known team including Rune Christensen (co-founder), Sébastien Derivaux, and others. Long track record of operating a multi-billion-dollar protocol
• Legal entity: "Skybase International" operates the sky.money front-end per the user-risks legal page. The Sky Protocol itself is described as "non-custodial blockchain-based software". Per Section 5 / 6 of the Skybase International Terms of Use, the Terms (and any non-contractual obligations) are governed by the laws of the Cayman Islands, with arbitration under the Cayman Islands Association of Mediators and Arbitrators (CI-ArbCA) and the seat of arbitration in George Town, Grand Cayman. Courts of the Cayman Islands hold exclusive jurisdiction for non-arbitrable disputes. US residents are explicitly excluded from certain features (Sky Savings Rate and Sky Token Rewards)
• Documentation: Comprehensive — Sky maintains developers.skyeco.com, docs.sky.money, the public chainlog (chainlog.sky.money), GitHub org sky-ecosystem with all production contract source code, and detailed governance forum at forum.sky.money
• Incident response track record:
  • Black Thursday (March 2020) — Sky/MakerDAO governance held an emergency vote, minted MKR to recapitalize the system, paused vulnerable auctions, and shipped Liquidations 2.0
  • USDC depeg (March 2023) — governance widened PSM fees temporarily and accelerated RWA diversification
  • No USDS-specific incidents to date
• Monitoring infrastructure: Sky publishes a live chainlog with all production addresses; LlamaRisk and Block Analitica produce regular risk dashboards. The Yearn monitoring repository already includes USDS-adjacent strategies (yvUSDS-1) in its hourly Telegram-alert pipeline (source)
• Bug bounty: $10M Immunefi, live 4+ years
• Disclosed legal risks: user-risks explicitly warns about front-end attacks, "altering the interface to display incorrect information," "injecting malicious transaction data," and "phishing attacks." US residents are excluded from certain features

Monitoring

Key Contracts to Monitor

Contract	Address	Critical Values / Events
USDS	0xdC035D45d973E3EC169d2276DDab16f1e407384F	totalSupply(), Upgraded(impl) event (implementation change), Rely(usr) / Deny(usr) events on wards
sUSDS	0xa3931d71877C0E7a3148CB7Eb4463524FEc27fbD	chi(), ssr(), totalAssets(), Upgraded(impl), Drip() event frequency
LitePSM Wrapper	0xA188EEC8F81263234dA3622A406892F3D630f98c	BuyGem / SellGem events, halted state of underlying PSM
Underlying LitePSM	0xf6e72Db5454dd049d0788e411b06CfAF16853042	tin, tout, buf, Halt events
USDC Pocket	0x37305B1cD40574E4C5Ce33f8e8306Be057fD7341	USDC.balanceOf(pocket) — exit-capacity gauge
LitePSM Mom	0x467b32b0407Ad764f56304420Cddaa563bDab425	Any call (would be an emergency halt)
MCD_PAUSE	0xbE286431454714F511008713973d3B053A2d38f3	Plot events (scheduled spells), delay() value, Exec
MCD_PAUSE_PROXY	0xBE8E3e3618f7474F8cB1d074A26afFef007E98FB	Outgoing calls = enacted governance
Chief	0x929d9A1435662357F54AdcF64DcEE4d6b867a6f9	hat() rotation, top approvals
DAI-USDS Converter	0x3225737a9Bbb6473CB4a45b7244ACa2BeFdB276A	Volume
USDC token at Pocket	USDC.balanceOf(pocket)	Pocket reserve level
USDS LayerZero OFT Adapter	0x1e1D42781FC170EF9da004Fb735f56F0276d01B8	owner() (should always equal PauseProxy), endpoint(), any Upgraded events on underlying token; DVN config via getUlnConfig — alert if requiredDVNCount drops below 2
sUSDS LayerZero OFT Adapter	0x85A3FE4DA2a6cB98A5bdF62458B0dB8471B9f0f1	owner() (should always equal PauseProxy), endpoint(); any cross-chain supply anomalies
Native L2 bridge escrows (Base/Optimism/Unichain/Arbitrum)	0x7F31…9Ef3 · 0x4671…6C65 · 0x1196…566A · 0xA10c…9400	USDS.balanceOf(escrow) / sUSDS.balanceOf(escrow) should equal the minted L2 supply; wards[PauseProxy] on each token bridge
Prime allocator ilks (Spark, Grove, Obex, Keel)	MCD_VAT.ilks(ilk) for ALLOCATOR-SPARK-A, ALLOCATOR-BLOOM-A, ALLOCATOR-OBEX-A, ALLOCATOR-NOVA-A	Art × rate (drawn debt) and line (debt ceiling) per allocator — ~49.8% of VAT debt is issued here

Critical Values, Thresholds, and Frequency

Metric	Source	Threshold to alert	Frequency
USDS spot price	DEX TWAP / CoinGecko	< $0.995 or > $1.005 (>0.5% deviation)	15 min
USDC Pocket balance	onchain	< $500M (would signal heavy redemption load)	Hourly
Prime allocator ilk debt	MCD_VAT.ilks	Any allocator's drawn debt rises >20% in 7 days, or a new ALLOCATOR-* ilk is onboarded	Daily
LitePSM tin, tout, buf	onchain	Any change	On Rely/File event
LitePSM Halt	event log	Any Halt event	Real time
MCD_PAUSE scheduled spells	Plot event	Any spell touching USDS / sUSDS / PSM / Pocket	Behind timelock
sUSDS ssr rate	onchain	Any change >50 bps APY	Behind timelock
USDS / sUSDS implementation slot	EIP-1967 slot	Any change → Upgraded event	Behind timelock
USDS total supply (cross-chain, all chains)	DefiLlama API	Sudden >5% drop in 24 h	Hourly

Appendix: Contract Architecture

Snapshot block 25939320 (September 9, 2026).

┌──────────────────────────────────────────────────────────────────────────┐
│                              USER LAYER                                   │
│                                                                           │
│   user holds USDC ───────┐               ┌────── user holds USDS          │
│                          ▼               ▼                                │
│   ┌──────────────────────────────────────────────────────┐                │
│   │  WRAPPER_USDS_LITE_PSM_USDC_A  (0xA188…f98c)         │                │
│   │  sellGem / buyGem  — atomic, 0% fee, 1:1            │                │
│   └────────────────┬──────────────────────┬─────────────┘                │
│                    │                      │                              │
│                    │  daiUsds.daiToUsds   │  daiUsds.usdsToDai            │
│                    ▼                      ▼                              │
│   ┌──────────────────┐         ┌──────────────────────┐                  │
│   │ DAI_USDS         │         │  MCD_LITE_PSM_USDC_A │                  │
│   │ 0x3225…F276A     │◄────────│  0xf6e7…3042         │  buf=800M DAI    │
│   │ 1:1 DAI↔USDS     │         │  tin=tout=0          │                  │
│   └─────────┬────────┘         └──────────┬───────────┘                  │
│             │                             │                              │
│             │  usdsJoin / daiJoin         │  pocket holds USDC           │
│             ▼                             ▼                              │
│   ┌──────────────────┐         ┌──────────────────────┐                  │
│   │ USDS_JOIN        │         │  POCKET              │ 3.95B USDC       │
│   │ 0x3C0f…7FEB      │         │  0x3730…7341         │                  │
│   │ wards[USDS] = 1  │         └──────────────────────┘                  │
│   └─────────┬────────┘                                                   │
│             │                                                             │
│             ▼                                                             │
│   ┌──────────────────────────────────────────────────┐                   │
│   │              MCD_VAT (core ledger)                │  ~12.06B debt    │
│   │              0x35D1…492B                          │  (DAI+USDS)      │
│   │  Holds all ilk debt: ETH-A, wstETH-A, RWA-*,     │                  │
│   │  PSM-USDC-A, LockStake, D3M Spark, etc.          │                  │
│   └──────────────────────────────────────────────────┘                   │
└──────────────────────────────────────────────────────────────────────────┘
                                  │
                                  │
                          USDS-denominated
                                  │
                                  ▼
┌──────────────────────────────────────────────────────────────────────────┐
│                           SAVINGS LAYER                                   │
│                                                                           │
│   user deposits USDS                                                      │
│                  │                                                        │
│                  ▼                                                        │
│   ┌──────────────────────────────────────────────────┐                   │
│   │  sUSDS  (0xa393…7fbD)  — ERC-4626                │                   │
│   │  implementation 0x4e79…61e0                       │                   │
│   │  chi = 1.1090   ssr = ~3.60% APY                 │                   │
│   │  totalAssets() = 4.67B USDS                      │                   │
│   │  totalSupply()  = 4.22B sUSDS                    │                   │
│   └──────────────┬───────────────────────────────────┘                   │
│                  │  drip() accrues from USDS_JOIN via VAT/VOW            │
│                  ▼                                                        │
│             SSR yield (parameter set by governance)                       │
└──────────────────────────────────────────────────────────────────────────┘

┌──────────────────────────────────────────────────────────────────────────┐
│                         GOVERNANCE LAYER                                  │
│                                                                           │
│   SKY holders (23.46B total supply)                                       │
│         │                                                                 │
│         │  lock + approve                                                 │
│         ▼                                                                 │
│   ┌──────────────────────┐                                                │
│   │   MCD_ADM  (Chief)   │  hat() = 0x2bf5…2E05                          │
│   │   0x929d…6f9         │  continuous-approval                          │
│   └──────────┬───────────┘                                                │
│              │                                                            │
│              │  plot spell                                                │
│              ▼                                                            │
│   ┌──────────────────────┐                                                │
│   │   MCD_PAUSE          │  delay = 172800 (48 h GSM)                    │
│   │   0xbE28…38f3        │                                                │
│   └──────────┬───────────┘                                                │
│              │                                                            │
│              │  exec after delay                                          │
│              ▼                                                            │
│   ┌──────────────────────┐                                                │
│   │   MCD_PAUSE_PROXY    │  executes spells; wards[USDS]=1,              │
│   │   0xBE8E…aFF52       │  wards[sUSDS]=1, owns USDS/sUSDS upgrades     │
│   └──────────┬───────────┘                                                │
│              │                                                            │
│              ▼                                                            │
│      modifies parameters on USDS, sUSDS, LitePSM, VAT, etc.              │
│                                                                           │
│   Emergency channel (no 48 h delay):                                      │
│   ┌──────────────────────┐                                                │
│   │  LITE_PSM_MOM        │  authority=Chief, owner=PauseProxy            │
│   │  0x467b…b425         │  HALT() pauses USDC↔USDS swaps instantly      │
│   └──────────────────────┘                                                │
└──────────────────────────────────────────────────────────────────────────┘

---

Reassessment Triggers

• Time-based: Reassess in 6 months (March 2027) or annually
• TVL-based:
  • USDS supply drops >25% from snapshot (~$6.65B → <$5.0B) — would indicate material loss of confidence or large policy event. Supply has contracted ~15% since June 2026, so this trend deserves attention even short of the threshold
  • sUSDS share of USDS supply drops below 50% (currently ~70.3%) — would indicate SSR has been cut materially or savers are exiting
  • USDC Pocket balance drops below $500M — would indicate sustained exit pressure and compromise of the deep-redemption story
  • Total cross-chain USDS supply (currently ~109M across all bridges) spikes >$1B, or LayerZero-bridged supply (currently ~6.67M, Solana + Avalanche) grows materially — would indicate rising bridge dependency exposure
• Parameter-based:
  • Any Prime allocator ilk (ALLOCATOR-SPARK-A, ALLOCATOR-BLOOM-A, ALLOCATOR-OBEX-A, ALLOCATOR-NOVA-A) grows >20% in 7 days, or a new ALLOCATOR-* ilk is onboarded → re-review the backing look-through
  • LITE_PSM_USDC_A.tin or tout changes from zero (fees introduced) → harden Liquidity score
  • LITE_PSM_USDC_A.buf changes materially → re-evaluate exit capacity for USDC→USDS direction
  • sUSDS.ssr changes by >50 bps APY → not a risk event but warrants user-facing notice
  • MCD_PAUSE.delay() is reduced below 48 h → governance score worsens
  • USDS.wards() grants a ward outside the current set (USDS_JOIN, PauseProxy) → re-review mint authority
  • USDS_OFT.owner() or SUSDS_OFT.owner() changes from PauseProxy → re-review OFT adapter governance
• Incident-based:
  • Any LITE_PSM_MOM.HALT() invocation (emergency PSM halt)
  • Any USDS depeg deeper than ±1% sustained for >24 h
  • Any USDC depeg event (would propagate to USDS via PSM)
  • Any LayerZero protocol-level or DVN-level incident — especially involving the LayerZero Labs (0x589d…236b) or Nethermind (0xa59B…0BA5) DVNs that secure Sky's OFT channels — or any drop in Sky's requiredDVNCount below 2
  • Cross-chain USDS supply discrepancy >5% between onchain mainnet USDS.totalSupply() and DefiLlama aggregate — would signal a potential OFT exploit or bridge state mismatch
  • Any exploit or governance attack on the Sky/MCD core (Chief, Pause, VAT, USDS, sUSDS, LitePSM, USDS_JOIN, DAI_USDS, Pocket, OFT)
  • Any blacklisting of the USDC Pocket by Circle
• Governance-based:
  • SKY voter concentration changes materially: single supporter exceeds 50% of Chief.approvals(hat), top-3 current-hat concentration rises materially from the September 9, 2026 baseline of ~90.6%, or top-5 concentration remains near-total while the hat margin narrows
  • New USDS / sUSDS implementation deployed (would reset the audit baseline)
  • RWA or Prime allocator program changes materially (new custodians or allocators, large reallocations, custodian incidents)