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Spark Lend is the initial product that will let anyone borrow DAI at the DAI Savings Rate (currently 1%). The proposal states that Spark Lend will accept BTC, ETH, DAI, and wrapped derivatives of staked ETH as collateral. Maker’s synthetic liquid staking derivative, EtherDAI, will be implemented with fixed-term yield products in the future.
Spark plans to debut in April by establishing a DAI lending vault on Maker with a debt maximum of $200 million. It would use the DeFi lending giant’s enhanced third edition, Aave v3, which features a smart contract mechanism. In return, the Phoenix Labs development team has promised to donate 10% of its future earnings from the Spark Protocol’s DAI market to the Aave DAO.
The Maker community will vote on whether or not to adopt the Spark Protocol.
A milestone for Maker
MakerDAO is a major player in the DeFi space, issuing the $5 billion DAI stablecoin backed by almost $7 billion in assets. As a leading lending protocol, Aave has secured $7.2 billion in assets for its users. Governance token holders in both protocols have a say in DAO decisions through voting.
The proposal represents a watershed moment for Maker since Spark will be the first native Maker-based lending interface with which any crypto user can engage, including linking their crypto wallets and borrowing directly from Maker.
Spark’s users will generate additional income for Maker through lending and borrowing. Maker has been trying to increase its revenue sources by investing some of its $7 billion in reserve assets in different yield-generating initiatives, such as collaborating with Coinbase’s custody network for cryptocurrencies and buying U.S. government bonds. Maker shares some of its surplus cash flow with DAI holders through a 1% yearly payout or DAI Savings Rate.
The idea expands upon Maker founder Rune Christensen’s lofty, divisive “Endgame plan,” which is geared toward partitioning MakerDAO’s control into smaller pieces known as SubDAOs.
Phoenix Labs is behind the Spark Protocol proposal and aims to produce new products based on the Maker protocol.
Chief technical officer of Phoenix Lab and well-known Maker contributor Sam MacPherson recently tweeted that numerous rival SubDAOs were being built in 2019 with accompanying tokens connected to cash flows from the SubDAO goods as part of the Endgame strategy.
Makers everywhere will have complete legal titles to the Spark protocol. Specifically, “Once the Creator subDAO model is established, Spark Protocol can be transitioned to one of them,” as the proposal puts it.
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