Sky(Formerly MakerDAO) vs AAVE in 2025: Comprehensive Investment Guide
Introduction: The Evolution of Sky and AAVE
In recent years, the DeFi space has grown exponentially, with MakerDAO and Aave emerging as two of the most significant protocols in decentralized finance. MakerDAO led the charge in stablecoin issuance, providing a decentralized alternative to fiat-backed stablecoins through its innovative DAI model. Meanwhile, Aave revolutionized the lending sector by introducing non-custodial lending and borrowing services, allowing users to interact with DeFi without intermediaries.
However, as the ecosystem matures, these platforms have undergone significant transformations. MakerDAO has rebranded into Sky Protocol, introducing a more sophisticated governance structure, multi-chain expansion, and a new stablecoin, USDS. At the same time, Aave has continuously expanded its feature set with innovations like GHO stablecoin, real-world asset integration, and multi-chain deployments to maintain its competitive edge in DeFi lending.
For SoSoValue users, this guide provides a deep dive into:
The transition from MakerDAO to Sky Protocol and its impact on the DeFi landscape
Aave’s continuous innovation in decentralized lending and its role in shaping DeFi
Key metrics and comparisons to help investors assess their investment potential
History and Background
MakerDAO, founded in 2014 by Rune Christensen, was one of the earliest DeFi projects. In August 2024, MakerDAO underwent a rebranding to Sky Protocol, aiming to further decentralize DeFi and improve user experience. As part of this transformation, the protocol introduced USDS (a new stablecoin) and SKY (a governance token), replacing DAI and MKR, respectively.
Core Features
USDS Stablecoin Issuance: Users can deposit collateral (ETH, USDC, etc.) to mint USDS, ensuring its value stability.
Collateralized Debt Positions (CDPs): A system where users lock up assets to borrow USDS.
SKY Governance: SKY holders vote on risk parameters, collateral types, and protocol changes.
Burn Mechanism: SKY is burned when loans are repaid, reducing supply and potentially increasing its value.
Skylink Multi-Chain Support: Facilitates USDS and SKY migration across multiple Layer 2 networks.
Recent Updates
Sky Protocol Rebrand: MakerDAO transitioned to Sky Protocol in August 2024, introducing a new governance structure.
USDS & SKY Migration: Users can upgrade 1 DAI to 1 USDS and 1 MKR to 24,000 SKY.
Sky.money Platform: A new DeFi hub managed by Skybase, enhancing accessibility and functionality.
Multi-Chain Expansion: Skylink enables USDS and SKY to integrate with multiple Layer 2 solutions.
Aave (AAVE) Overview
History and Background
Launched in 2017 as ETHLend and rebranded to Aave in 2018, Aave revolutionized DeFi lending with an algorithmic liquidity protocol. Unlike Sky, which focuses on stablecoin issuance, Aave specializes in lending and borrowing, allowing users to earn interest on deposits and access crypto loans without intermediaries.
Core Features
Decentralized Lending & Borrowing: Users deposit assets to earn interest and borrow funds with over-collateralization.
Flash Loans: Unique feature allowing users to borrow without collateral, provided the loan is repaid within a single transaction.
AAVE Governance: Token holders vote on protocol upgrades, risk parameters, and new asset listings.
Variable & Stable Interest Rates: Borrowers can switch between floating and fixed interest rates.
Recent Updates
Aave V3 Upgrades: Improved risk management, efficiency mode (eMode), and multi-chain expansion.
GHO Stablecoin Launch: Aave introduced GHO, a decentralized overcollateralized stablecoin, enhancing the protocol’s ecosystem.
Aave on Ethereum Layer 2s: Expanded support on Polygon, Arbitrum, Optimism, and Avalanche to improve scalability.
Real-World Asset Integration: Aave is increasingly integrating RWAs into its lending pools to enhance liquidity and risk management.
Key Takeaways
Let’s take a closer look at the key metrics of both platforms:
Metric | Sky (Formerly MakerDAO) | Aave (AAVE) |
Total Value Locked (TVL) | ～$5.3Billion | ~$19.5Billion |
Market Cap | ~$1.04Billion | ~$3.79 Billion |
Use Case | Stablecoin issuance | Lending & borrowing |
Main Stablecoin | USDS | GHO |
Governance Model | SKY holders vote | AAVE holders vote |
Revenue Model | Stability fees, liquidation penalties | Interest rates, borrowing fees |
Recent Developments | Sky rebranding, USDS & SKY launch | Aave V3, GHO Stablecoin |
Investment Considerations
Why Invest in Sky (SKY)?
Sky Protocol, as the successor to MakerDAO, inherits a well-established ecosystem of decentralized stablecoin issuance. USDS aims to maintain the stability and utility of its predecessor, DAI, making it a vital component of DeFi. As Sky transitions into a more advanced multi-chain framework, its governance token SKY could benefit from increased utility and protocol adoption.
One of the key reasons to consider investing in SKY is its deflationary tokenomics. Similar to MKR, SKY undergoes a burning mechanism where a portion of the token supply is reduced when loans are repaid. This deflationary model could lead to value appreciation over time, assuming steady demand for USDS.
Another significant advantage of Sky is its multi-chain integration through Skylink. This feature expands Sky’s usability beyond Ethereum, allowing USDS and SKY to operate across multiple Layer 2 solutions. The improved accessibility may enhance adoption, increasing the protocol’s total value locked (TVL) over time.
However, investing in SKY also carries risks. Regulatory scrutiny surrounding stablecoins remains a concern, as governments may impose stricter compliance measures. Additionally, Sky.money’s access restrictions and the freeze function embedded in USDS contracts have sparked debates about decentralization.
Why Invest in Aave (AAVE)?
Aave continues to be a dominant player in the DeFi lending sector, offering innovative features such as flash loans and risk-adjusted lending pools. Its ability to support a diverse range of assets, including real-world assets (RWAs), positions it as a flexible and scalable platform.
One of Aave’s most promising developments is the launch of GHO stablecoin. If GHO gains widespread adoption, it could generate additional revenue streams for the protocol, increasing demand for AAVE tokens. This development aligns with Aave’s broader strategy of diversifying its offerings beyond traditional lending.
Aave’s expansion to multiple chains, including Polygon, Arbitrum, Optimism, and Avalanche, further solidifies its market position. By addressing Ethereum’s scalability issues, Aave can attract more users who seek efficient, low-cost lending solutions.
However, Aave faces challenges in the form of competition from other DeFi lending protocols such as Compound and Curve. Additionally, as a highly complex smart contract-based system, Aave is susceptible to security vulnerabilities, making periodic audits and robust risk management essential for its long-term success.
Conclusion: Which Is the Better Investment?
Both Sky and Aave play critical roles in DeFi, but their investment potential depends on individual risk tolerance and market conditions.
For conservative investors, Sky presents a more stable, long-term investment. The demand for decentralized stablecoins remains strong, and USDS is well-positioned to continue DAI’s legacy. Additionally, Sky’s deflationary model and multi-chain integration could contribute to sustainable growth over time.
For growth-focused investors, Aave’s continuous innovation makes it a strong contender for long-term value appreciation. Features like flash loans, real-world asset lending, and the introduction of GHO stablecoin provide Aave with multiple revenue streams and a competitive edge in the DeFi space.
Ultimately, diversifying across both SKY and AAVE could be a strategic approach to balancing stability and high-growth potential within a DeFi portfolio. As the sector continues to evolve, keeping track of these platforms’ ongoing developments will be crucial for making informed investment decisions.