BA Labs Proposes Zeroing Debt Ceilings on Five Sky Vaults

By Tom Whitfield

BA Labs proposed on Nov. 12 that Sky zero debt ceilings for five legacy Core Vault types; its analysis put outstanding debt at $376.33 million in USDS across 771 open vaults.

BA Labs serves as Sky's Core Council risk advisor. The recommendation targets $ETH-A, $ETH-B, $ETH-C, WSTETH-A and WSTETH-B. It would set their maximum debt ceilings to zero and remove them from the Debt Ceiling Instant Access Module, or DC-IAM.

“Existing positions are not affected beyond losing the ability to mint more,” BA Labs wrote.

The five vaults accept ether or wstETH, Lido's wrapped staked ether, as collateral. Under the proposal, borrowers could still repay debt, add collateral and withdraw collateral under existing rules. Their positions would remain subject to liquidation, but the vaults could no longer mint additional debt.

What does the proposal change?

Sky, formerly MakerDAO, uses collateral vaults to lock assets and generate DAI. DAI can be converted one-for-one into USDS, so the five legacy types provide a direct minting route for new USDS. The recommendation would close that route without forcing existing borrowers to repay.

BA Labs cited reducing potential attack vectors as its reason for the shutoff. The advisor said none of the five current ceilings constrains users. It also argued that stopping new debt was unlikely to turn away meaningful borrowing.

The recommendation separates restrictions on new issuance from the treatment of outstanding obligations. It sets no repayment deadline for the reported $376.33 million and does not require a borrower to withdraw collateral. Existing positions would remain subject to the same liquidation framework while borrowers retain the stated collateral-management options.

For Sky, the proposed market-structure change narrows the active legacy vault route rather than forcing an unwind of the debt stock. Existing positions would remain in place at implementation, while individual exposures would continue to evolve under repayment, collateral and liquidation rules.

That distinction limits the immediate scope. The change affects borrowers' ability to create additional debt through the affected vaults, not the status of collateral already deposited. The recommendation does not turn the zero ceilings into a liquidation trigger or a forced repayment event.

How large is the contraction?

BA Labs reported that debt fell 25.18% over the preceding 365 days and the number of open vaults dropped by 177 during the same period. The proposed zero ceilings would apply after that broad contraction rather than initiate it.

The contraction did not extend to every category. Debt in $ETH-A grew by 7.76 million USDS over the same 365-day period, and the recommendation would stop further borrowing there as well. BA Labs nevertheless argued that its five categories were not constraining current users and that closing them would not deter meaningful demand.

WBTC-A, WBTC-B and WBTC-C already have zero ceilings and remain outside the proposal. The change therefore targets five ether- and wstETH-backed legacy types rather than the three WBTC categories.

What must happen before the halt takes effect?

The recommendation remains nonbinding. Removing the vault types from DC-IAM requires an executive spell, a governance-approved onchain action under the module's rules. BA Labs specified no execution date.

Until Sky approves and executes that spell, the recommendation itself does not change the module or close the minting route. The next concrete checkpoint is the onchain action: once executed, it would remove the five types from DC-IAM and impose zero maximum debt ceilings, while leaving existing repayment, collateral and liquidation mechanics intact.