Aave Ethereum sDAI is a lending market for Sky's sDAI (Savings DAI), the yield-bearing wrapper for DAI. sDAI automatically earns the Sky Savings Rate (SSR), meaning it accrues yield before even being deposited into Aave. This creates a stacked yield opportunity: SSR yield plus Aave supply yield.
How This Market Works
sDAI lending creates layered returns:
Convert DAI to sDAI (starts earning SSR, typically 5-8%)
Deposit sDAI into Aave V3 lending pool
Receive aETHsDAI tokens representing your position
Earn additional interest from sDAI borrowers
Total yield = Sky Savings Rate + Aave supply yield
Low Native APY: Like other yield-bearing collateral, sDAI has low Aave supply rates because the asset already generates yield. Borrowers use sDAI primarily as collateral.
Capital efficiency (using yield-bearing assets as collateral)
Accessing liquidity without exiting SSR position
Leveraged savings strategies
Sky Savings Rate (SSR)
The SSR is set by Sky governance:
Currently offers competitive stablecoin yields
Yield comes from DAI borrowers in the Sky ecosystem
Rate adjusts based on market conditions and governance
Historically ranged from 1% to 15%+ depending on market conditions
Risk Disclosures
Smart Contract Risk: Exposure to both Aave V3 and Sky protocol contracts. Each adds risk surface.
SSR Dependency: sDAI's value appreciation depends on the Sky Savings Rate. Rate changes directly affect yield expectations.
Governance Risk: Both Aave and Sky are governed by token holders. Parameter changes in either protocol affect sDAI positions.
Peg Risk: sDAI's underlying DAI could experience peg instability during extreme market conditions.
Oracle Risk: sDAI's value must be accurately tracked, accounting for accumulated SSR yield.
Utilization Risk: While typically low for yield-bearing collateral, market stress could affect withdrawals.
Rate Competition: High SSR rates may draw capital away from Aave sDAI markets, affecting liquidity.
Disclaimer: APY and TVL figures are based on on-chain data and may fluctuate. Past performance does not guarantee future results. DeFi investments carry smart contract, market, and liquidity risks. This content is for informational purposes only and does not constitute financial advice. Always conduct your own research before investing.
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