MakerDAO Proposes Native Token Liquidity Market On Spark Protocol

Decentralized Finance platforms like Uniswap, Aave and MakerDAO seem to be on a building streak. MakerDAO, a leading DeFi platform has proposed to develop Spark Protocol – an independent market that will act as a catalyst for adoption of algorithmic stablecoin DAI. According to the proposal posted on MakerDAO’s governance forum on wednesday MakerDAO’s $5 billion assets in DAI will be reserved for this move. Spark protocol will be based on Aave’s new and upgraded smart contract. 

According to the proposal, the lending protocol’s first product ‘Spark Lend’ will allow users to borrow the native token of MakerDAO- DAI at a set DAI savings rate which stands at 1% at the time of writing. The protocol will enable highly liquid assets like ETH, DAI and wrapped derivatives like taked ETH (wstETH) and BTC (wBTC) to be used as collateral for crypto lending. The platform will also incorporate crypto futures with fixed term yield products alongside Maker’s own synthetic Liquid Staking Derivative (LSD) called EtherDAI. 

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Spark protocol will use Aave’s third version of smart contracts. Aave is one of the leading DeFi giants in the ecosystem. The developers of Spark protocol – from Phoenix Labs are considering sending 10% of the profits to AaveDAO after 2 years. 

Spark plans to go live in April and will create a DAI lending vault for storing assets. Its limit is capped at $ 200 million. This is subject to the number of votes the proposal will receive. 

Maker’s Journey and its way ahead 

MakerDAO was the brainchild of a Danish entrepreneur Rune Christensen. The DAO was launched in 2014 and its native algorithmic stablecoin DAI was launched in 2017. Today, MakerDAO is the largest decentralized finance protocol (DeFi) with $ 7 billion worth of assets in treasury. A token treasury is an important part of any decentralized crypto platform. Its reserves are used for developing better features and to fund new finance based initiatives. 

If the proposal to develop and launch Spark protocol receives a green signal from the community then this could be a gamechanger for MakerDAO’s native stablecoin as crypto traders will be able to borrow DAI in lieu of high liquid assets. Users can simply connect their crypto wallet on Spark and borrow DAI by locking their assets as collateral. The protocol aims at generating revenue for MakerDAO with DeFi solutions that involve DAI. Maker has set aside some assets worth $ 7 billion to invest in yield generating strategies like investing in US government bonds and partnering with crypto exchange Coinbase’s custody platform COIN. Maker distributes 1% of its annual earnings to the community as reward. The system of rewards in Maker is called the DAI Savings Rate’.

According to the proposal’s characteristics, this move of adding liquidity to a separate platform will enable breaking the main DAO into Sub DAO’s which apparently happens to be Maker creator’s ‘Endgame Plan’. 

“As part of the Endgame plan, multiple competitive SubDAOs are being formed next year with associated tokens that are linked to cash flows from the SubDAO products,” Sam MacPherson, CTO, Phoenix Labs tweeted.

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

The Spark Protocol will be fully managed and owned by the MakerDAO community once the framework of Sub DAO’s is established. 

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Source: Coindesk