Sky Ecosystem: August Financial & Operational Update

Welcome to the Monthly Financial & Operational Update, published by the Sky Frontier Foundation. Each month, this briefing covers the protocol data, capital markets activity, and governance developments that matter to ecosystem participants.

Executive Summary

August 2026 was defined by a shift in how Sky Protocol allocates its surplus. SKY Staking Rewards entered Stage 2 of the capital management framework published in April, moving from treasury-funded to revenue-funded distribution and introducing a permanent buy and burn allocation. Alongside that change, Sky Frontier Foundation published its Q2 2026 Quarterly Insights Call and Report, Sky Agent Osero launched its consumer app, and Token Terminal placed Sky Protocol as the largest issuer in the tokenized funds market.

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Key Highlights:

• Stage 2 of SKY Staking Rewards Activated: Sky Governance ratified the transition on August 13. Each settlement cycle now allocates 22.5% of surplus to SKY buybacks for Staking Rewards, 22.5% to USDS Staking Rewards, 5% to SKY buy and burn, and up to 50% to the Surplus Buffer.
• Q2 2026 Quarterly Insights Call Published: Rune Christensen and Greg Feibus discussed the quarter's results, the growth of Sky Reserves, and activity across the Sky Agent Network, and answered questions from community and institutional participants.
• Osero Launches the Osero App: Osero launched its consumer app on August 18, followed on August 26 by Osero Yield+, a levered sUSDS strategy built on Morpho and Aera with risk curation by Gauntlet.
• Largest Issuer in Token Terminal's Tokenized Funds Category: Token Terminal data as of August 21 placed Sky at $4.6B in tokenized funds, ahead of other big players like Securitize, Circle, Franklin Templeton, and Ondo Finance, in a category totaling $34.4B.

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Sky Protocol Financials & Onchain Metrics

Protocol Collateral grew 18.2% year-over-year to $11.10B, and month-over-month rose from $10.98B at the July close, with Sky Agent vaults accounting for most of the increase as they expanded from $5.63B to $6.06B. Total Stablecoin Supply closed the month at $9.53B, up from $9.41B in July.

Gross Protocol Revenue declined 11.47% against August 2025. Net Protocol Revenue declined further, as expenses have since grown alongside the scaling of sUSDS. Net Protocol Surplus increase by 13.40% YoY as the Sky Frontier Foundation continues to focus on growing the Sky Reserves.

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Capital Markets Activity

Sky Protocol Tops Token Terminal's Tokenized Funds Ranking

‍Token Terminal data as of August 21 placed Sky Protocol at $4.6B in tokenized funds, the largest share of the $34.4B tokenized funds category, as reported by Crypto Times.

Institutional Allocations Across the Sky Agent Network

As of September 1, Sky Agents held approximately $1.23B with Janus Henderson, $618.32M with BlackRock, $304M with Galaxy, $220M with Anchorage, $239.60M in PayPal USD, and $103.11M in Securitize. Galaxy is the notable mover of this period: exposure stood at $27M at Q2 close and had increased to ~$304M, driven by the Grove warehouse lending facility announced in July. Allocations are published at token level and updated continuously.

SKY Buybacks Scale Up

Daily open-market SKY buybacks approximately doubled during the month, rising from about $38K per day since mid-March to roughly $73K per day, per KuCoin Insights. This increase is due to the activation of the programmatic revenue waterfall and cites $2.31M of July net revenue allocated to buybacks.

Sky Protocol Product Suite Reaches $7.1B in TVL

Sky.money reported $7.1B across the full product suite on August 19: $4.92B in the Sky Savings Rate, $995M in SKY Staking, $739M in Ecosystem Rewards, $202M in stUSDS, $117M in Sky-curated Morpho Vaults, and $81M in Fixed Yield.

Mantle Opens Its Vault Product to DeFi

Mantle moved its $200M Vault product onchain with a strategy coordinated by Sky Agent Grove and built by CIAN, as reported by Crypto Briefing. The unlevered structure includes sUSDS exposure and carries a 5.14 million GROVE incentive program.

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Governance & Risk Management

SKY Staking Rewards Enter Stage 2

Sky Protocol transitioned SKY Staking Rewards from treasury-funded to revenue-funded distribution on August 13. Under Stage 2, each month's protocol surplus is allocated as follows:

• 22.5% to SKY buybacks for SKY Staking Rewards
• 22.5% to USDS Staking Rewards
• 5% to SKY buy and burn
• Up to 50% to the Surplus Buffer

SKY stakers can now elect to receive rewards in either SKY or USDS. Stage 2 is the continuation of the capital management framework published in April: build reserves first, then move staking rewards onto protocol revenue and toward a more balanced allocation of surplus.

Sky Reserves

Sky Reserves grew through most of August under the rules-based retention framework, rising from $82.40M at the Q2 close to $93.53M by August 30. On August 31, a transfer approved in the August 27 Executive Vote reallocated $16M of Genesis Capital from Sky Agent Ozone to Sky Frontier Foundation. The transfer draws on a previously approved budget, following the sunset of Genesis capitalization for new Sky Agents set out in the June update. Genesis Capital sits within the Sky Capital component of Sky Reserves, so consolidating it at the Foundation moves it outside the reserve perimeter and steps the reported balance down without any protocol expense being incurred. Sky Reserves closed the month at $76.99M against the $150M Solvency Reserve target.

Protocol Revenue Begins Reducing SKY Supply

Under Stage 2, 5% of Net Protocol Surplus is used each settlement cycle to buy and burn SKY on the open market, permanently removing it from circulation. This is the first time in several years that protocol income has actively reduced SKY supply.

Staking Participation

17.4B SKY was staked at month-end, representing approximately 74% of circulating supply, at an annual reward rate of 4.20% paid in SKY or 4.19% paid in USDS. Staked SKY stood at 73.3% of circulating supply at the Q2 close, up from 69.8% in Q1. Automated buybacks have deployed $121M to acquire 1.9B SKY since inception, of which $3.41M acquired 51M SKY during Q2 at an average price of $0.067.

Grove Governance and the Seeds Program

Sky Agent Grove brought its governance system live in early August, allowing GROVE holders to participate directly in the protocol's direction. Grove followed on August 12 with the Seeds Program, which rewards GROVE holders for active participation through delegation.

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Operational Updates & Integrations

Osero Launches Its App and a Levered sUSDS Strategy

Sky Agent Osero launched its app on August 18, giving users a route to put stablecoins to work without navigating DeFi directly. On August 26, Osero added Yield+, curated by Gauntlet. Deposited USDC or USDT is routed into sUSDS through Aera vault infrastructure, supplied as collateral on Morpho, and used to borrow and acquire additional sUSDS. Gauntlet monitors borrowing costs, leverage, and market health on an ongoing basis and adjusts parameters as conditions change rather than holding leverage fixed.

Grove Basin Completes Its First Onchain Transaction

Sky Agent Grove recorded the first onchain transaction through Grove Basin on August 5, a step toward moving tokenized assets past issuance and into instant onchain liquidity.

Spark Moves to a New Domain and Redesigns Borrow

Prime Agent Spark migrated to spark.finance and rebuilt Spark Borrow, bringing SparkLend and Isolated Markets together in a single interface with support for multiple collateral types.

Five Sky Vaults Live on Morpho

Sky.money now offers five curated vaults deployed on Morpho: USDS Flagship, USDT Savings, and Risk Capital vaults for USDS, USDC, and USDT. Each accepts a specific stablecoin and follows a defined strategy with its own risk profile and variable yield.

PT-sUSDS Collateral Market Builds

The PT-sUSDS to USDS market on Morpho, launched in late July, reached $2.56M by mid-August. Holders of the Fixed Yield position token can supply it as collateral and borrow USDS against it while maintaining their fixed rate.

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Looking Ahead

A New Sky.money Experience

Sky.money just announced a new experience in their app allowing users to manage their portfolio, earn yield, stake SKY, swap, and more all in one place.

Progress Toward the Solvency Reserve Target

Sky Reserves closed August at roughly half the $150M Solvency Reserve target. Once that target is crossed, the buyback allocation scales up automatically toward its long-run 25% share of Net Protocol Surplus. Coming updates will track the pace of accumulation under Stage 2.

In the next update we will cover a deeper overview of the sky.money app update, John Conneely's appearance at RWA Summit NYC, where he will join a panel on the infrastructure required to bring programmable money and onchain capital markets to scale, a preview of Q3 2026 reporting, and further activity across the Sky Agent Network. 

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Contact

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Have a question, seeking specific data requests or further clarification on Sky Ecosystem metrics? Contact us at insights@skyeco.com

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The content provided in this newsletter is for informational and educational purposes only and does not constitute legal, financial, investment, tax, or other advice. No part of this document is intended as, or should be construed as, an offer, solicitation, or recommendation to buy or sell any token, security, or other financial instrument, or to engage in any transaction or strategy, nor to form the basis of any investment or other decision. Views expressed are as of the issue date, based on the information available at that time, and may change based on market or other conditions. The content does not purport to be a complete description of the markets or developments referenced herein. The information has been obtained from sources considered to be reliable, but we do not guarantee its accuracy or completeness. All protocol data sourced from financial.skyeco.com unless otherwise noted.