Sky Ecosystem: July 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

July 2026 was defined by the publication of the Sky Ecosystem Q2 2026 Quarterly Report, which showed year-over-year growth across the protocol's headline metrics and a growing reserve position. Alongside the quarterly results, Sky Governance voted to narrow the Base Rate spread, Sky Protocol expanded its security program with Sherlock, and new Morpho integrations broadened how capital allocators access Fixed Yield positions and the Sky Savings Rate.

‍

Key Highlights:

• Q2 2026 Quarterly Report Published: Sky Protocol recorded $107.35M in Gross Protocol Revenue and $33.29M in Net Protocol Surplus, its fifth consecutive quarter in surplus. Sky Reserves received their largest quarterly contribution since the March 14 restructuring.
• Base Rate Spread Narrowed: Sky Governance cut the Sky Spread from 0.1% to zero through the weekly Atlas Edit cycle, ratified onchain on July 23.
• Ecosystem-Wide Security Review: Sherlock, one of the space’s leading audit firms, is running an AI-assisted review across Sky Ecosystem's smart contracts.
• PT-sUSDS Live as Collateral on Morpho: PT-sUSDS, the Fixed Yield position token, can now be posted as collateral on Morpho to borrow USDS, as the product's TVL continued to climb in its second month.

‍

Sky Protocol Financials & Onchain Metrics

Gross Protocol Revenue grew 20.5% year-over-year, while Protocol Collateral expanded 23.2% to $10.98B. Net Protocol Revenue declined against a July 2025 comparison period that carried an unusually light expense base, as Direct Expenses have since grown alongside the scaling of sUSDS. Net Protocol Surplus declined further because the Security and Maintenance distribution (20% of net revenue) was introduced in late 2025 and therefore did not reduce the July 2025 figure, which limits comparability of the bottom line. Month-over-month, Protocol Collateral declined from $12.32B at the end of June to $10.98B, with Prime Agent Vaults accounting for $1.21B of the decline, from $6.84B to $5.63B.

‍

Sky Ecosystem Q2 2026 Quarterly Report

Growth Across Every Headline Metric

‍On July 23, Sky Frontier Foundation published the Sky Ecosystem Q2 2026 Quarterly Report. Gross Protocol Revenue rose 10.5% year-over-year, from $97.15M to $107.35M. Protocol Collateral expanded 45.5% to $12.32B, and sUSDS closed the quarter at $5.52B, up 149%, maintaining its position as the largest rate-bearing stablecoin by supply.

Retention to Sky Reserves

‍$29.87M was added during Q2, ending the period at $82.40M against the $150M Solvency Reserve target.

Institutional Capital at Scale

‍Prime Agent Vaults closed Q2 at $6.84B, with approximately $2.58B deployed across six institutional counterparties: Janus Henderson, BlackRock, Anchorage, PayPal, Securitize, and Galaxy. The report also introduced Laniakea, the Foundation's framework for onboarding institutional partners at scale by replacing bespoke integrations with a standardized, reusable deployment stack.

Savings Distributions Dominate Protocol Expenses

‍$53.91M went to sUSDS holders through the Sky Savings Rate in Q2, roughly 80% of the quarter's protocol expenses.

‍

Capital Markets Activity

Grove's TGE and the Galaxy Facility

‍GROVE, the native governance token Grove introduced in June, went live in early July. Distribution began July 6 through Sky Ecosystem Rewards on Sky.money, where USDS suppliers accrue GROVE, and the token listed on Coinbase, Bybit, KuCoin, and Bitvavo on July 7. GROVE is an Ethereum ERC-20 with a fixed supply of 10 billion; following the launch, the GROVE position in the Sky Treasury is recognized at market value in the protocol's capital position, and the GROVE reward program holds roughly $186M in USDS balances. Grove also now backs Galaxy's institutional loan origination through a $500 million warehouse lending facility announced July 15, with Grove serving as the warehouse lender for institutional loans secured by digital assets and against the full loan portfolio. The facility adds to the roster of institutions building on USDS capital.  

Stablecoin FX Layer

Spark, Uniswap, and Sky Ecosystem took a first step toward a shared liquidity network for stablecoin markets, migrating more than $150M to Uniswap v4 across the USDS/USDT and USDS/PYUSD pools, which Spark described as one of the largest AMM liquidity migrations in DeFi to date. USDS provides the initial quoting foundation, with Spark coordinating allocation through governance-defined frameworks.

Peg Stability Module Volume on Uniswap

‍The PSM lets institutions swap USDC to USDS at 1:1 with zero slippage. Integrated directly into Uniswap, the PSM hook has processed approximately $550M in USDC-USDS volume.

Distribution and RWA Milestones

‍Cumulative Sky Savings Rate distributions to holders have crossed $250M since inception. Sky Protocol also stands as the largest Ethereum RWA issuer, with $5.2B in sUSDS and a 21% market share as of mid-July, per Token Terminal. sUSDS supply declined through July, from $5.52B at the Q2 close to $4.33B at month-end; the Token Terminal figure reflects the mid-month level.

‍

Governance & Risk Management

Sky Spread Cut to Zero

The approved Atlas Edit Weekly Cycle proposal for the week of July 20 leaves the 0.2% Distribution Reward Fee as the only spread between the Sky Savings Rate and the Base Rate, and updates the reference rate for subsidized borrowing and Actively Stabilizing Collateral from the Treasury Bill Rate to SOFR.

GROVE White Paper Published Under MiCAR

Grove published a crypto-asset white paper for the GROVE token under the EU Markets in Crypto-Assets Regulation (MiCAR) on July 3, available through the EU MiCAR registry.

AI-Powered Security Review with Sherlock

Every module and every associated contract across Sky Ecosystem is now part of a new AI-powered security review with Sherlock, per the July 21 announcement. The engagement responds to the accelerating pace at which attackers can find and exploit vulnerabilities using AI, and extends the ecosystem-wide cybersecurity hardening effort announced in the June update.

‍

Operational Updates & Integrations

PT-sUSDS on Morpho

Holders of PT-sUSDS from the Fixed Yield module on Sky.money can now supply it as collateral on Morpho and borrow USDS against it. A guide covering the integration, including how it works and the key risks to understand, was published alongside the launch.

Fixed Yield Growth

The Fixed Yield product for sUSDS, launched with Pendle Finance in June, drew $44.1M in TVL in its first month and reached $55.94M by late July at a 5.37% fixed rate, with a November 26, 2026 maturity. The early growth signals demand for fixed rates benchmarked to the Sky Savings Rate.

Sky Ecosystem Supports Ethereum Institutional

Sky Ecosystem announced its support for Ethereum Institutional's supporter coalition, which helps institutions navigate Ethereum, connect with credible partners, and move from evaluation to deployment.

‍

Looking Ahead

Sky Reserves Progress Toward the Solvency Reserve Target

With Sky Reserves at roughly 55% of the Solvency Reserve target at the end of Q2, the coming months' updates will continue to track the pace of accumulation under the rules-based retention framework.

In the next update we will cover the Q2 Insights Call with Rune Christensen and Greg Feibus, progress on the Sherlock engagement, and further activity across the Sky Agent Network.

‍

Contact

Want to receive this in your inbox every month? Subscribe at https://insights.skyeco.com

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

‍

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.