MakerDAO Members Propose Launching a Competitor to Aave

In the community MakerDAO, a proposal to create a Spark Protocol liquidity market based on the DAI stablecoin and collateral assets for the DeFi platform was put to a vote. The functionality will be built on the third version of the project’s smart-contract system from Aave.

A set of proposals with the aim of launching a new lending platform natively connected with the Maker Protocol landed on the Maker Forum.

• One Direct-Deposit Module (D3M) proposal

• Two Special Purpose Fund (SPF) proposals

Let’s see what’s going on ↓ pic.twitter.com/zLsswzYtB6

— Maker (@MakerDAO) February 8, 2023

The corresponding proposal was put forward by Phoenix Labs (formerly Crimson Cluster 17). Its authors focus on vertically integrating existing products within Maker and jointly creating value with developers.

Spark Protocol is intended to become Maker’s first native lending interface. The DeFi platform could gain an additional revenue stream by lending to its users as part of a strategy to utilise reserve assets.

Aave launched the Protocol’s third version on January 27, 2023. According to the platform’s founder Stani Kulechov, it added many new risk-reduction features, as well as improved capital efficiency and decentralised liquidity, all while reducing gas costs.

Aave Protocol V3 is now live on the Ethereum market ?

”The most exciting aspect of V3 is its flexible design, which enables a variety of new risk mitigation features, and its improved capital efficiency & decentralized liquidity – all while reducing gas costs.” @StaniKulechov pic.twitter.com/QsSnnlhEMr

— Aave (@AaveAave) January 27, 2023

The Spark Protocol initiative envisages launching the Spark Lend (SL) lending market, targeting the most liquid, decentralised assets with large market capitalisations.

The Spark Lend will allow users to borrow DAI against the DAI Savings Rate, which currently stands at 1%.

SL markets:

• DAI;
• ETH;
• wstETH from Lido;
• WBTC;
• Savings DAI (DSR-locked DAI).

In the future, there is an intention to include farming products with fixed maturities and a native synthetic derivative of liquid staking called EtherDAI.

If approved, Spark Lend would launch in April with a $200 million cap.

Over the next two years, Phoenix Labs will funnel 10% of the protocol’s profits to the Aave DAO.

The next steps on the 2023 roadmap include adding manipulation-resistant oracles, fixed rates — Spark Fixed Rates (SFR), support for L2 solutions and sidechains.

The combination of Maker’s liquidity, Spark Lend’s leverage and advanced fixed-rate protocols will bootstrap the DeFi yield curve and provide interest rate predictability for the ecosystem, — said Sam MacPherson, CTO of Phoenix Lab.

It is the combination of Maker’s liquidity, Spark Lend’s leverage and advanced fixed rate protocols that will bootstrap the DeFi yield curve and provide interest rate predictability for the ecosystem. pic.twitter.com/tRlTunrv7K

— Sam MacPherson (@hexonaut) February 8, 2023

The Phoenix Labs proposal aligns with the radical idea of Rune Christensen, founder of DAO Maker — to make DAI freely floating, not pegged to the USD. The plan entails effectively dividing MakerDAO’s governance structure into so-called sub-DAOs.

«As part of the Endgame plan, next year several competitive sub-DAOs with corresponding tokens will be formed, linked to the cash flows from the sub-DAO products», explained MacPherson.

I’m super excited to announce the launch of ⚡️ Spark Protocol ⚡️ — a growth-focused arm of the Maker Protocol.

Our first product is Spark Lend which builds upon Aave V3 to bring the best lending market features to Maker.

?? pic.twitter.com/GqIdKYZlHB

— Sam MacPherson (@hexonaut) February 8, 2023

According to the proposal, Spark Protocol will be owned entirely by the community. After creating the sub-DAO model, the protocol could be moved to one of them.

DeFi analyst Ignas saw in the Phoenix Labs initiative a reaction to Aave and Curve’s plans to launch their own stablecoins GHO and crvUSD — competitors to DAI. The threat to MakerDAO’s \”stablecoin\” also comes from the deployment of Compound v3, he added.

MakerDAO is the second-largest DeFi protocol by TVL. According to DeFi Llama, at the time of writing TVL is $7.24 billion — of which more than $3 billion are attributed to the PSM.

Earlier, Société Générale raised $7 million in DAI through a loan from the DeFi platform MakerDAO. Interaction with the financial conglomerate is an example of generating revenue from real-world assets.

In July 2022, the MakerDAO community approved the creation of a vault with a $100 million limit in DAI for American Huntington Valley Bank.

In October, users of the DeFi platform supported the proposal to move one-third of USDC from the stability module worth $1.6 billion to Coinbase Prime at a rate of up to 1.5% per year.

Earlier they approved the purchase of mortgage-backed securities worth $225 million, as well as activation of a special vault with the same size to acquire BlackRock ETF shares and to open credit lines with Arrow Global.

In November, the MakerDAO community decided not to transfer $500 million for management by CoinShares.