Decentralized finance (DeFi) protocols Aave and Sky (previously Maker) are exploring a partnership designed to “close the gap between DeFi and TradFi,” according to a Sept. 2 announcement.
The proposed partnership, referred to as the Sky Aave Force, follows a Sept. 2 governance proposal by Phoenix Labs, a DeFi research and development organization. The proposal suggests issuing SPK tokens—native to Sky’s subDAO, Spark—to help establish a market for USDS, a stablecoin launched after Maker’s August rebranding to Sky.
“Sky Aave Force has an ambitious goal: to drive mass adoption and close the gap between DeFi and TradFi. Now is the time to work together,” said Aave Labs, the developer behind the Aave DeFi lending platform.
Sky Aave Force aims to bridge DeFi, TradFi. Source: Aave Labs
Phoenix Labs proposes distributing up to 3.33 million SPK tokens per month to incentivize an Aave v3 market for Sky’s sUSDS, a yield-bearing token representing deposits in the Sky Savings Rate (SSR) program. Similar to its predecessor, the DAI Savings Rate (DSR) program, SSR provides yield to depositors from the revenues generated by Sky’s protocol.
As proposed, idle sUSDS on Aave “consistently earns the Sky Savings Rate (SSR), allowing the market to outperform the USDC/USDT counterparts,” Phoenix Labs said.
The proposal also suggests introducing a USDS Direct Deposit Module (D3M) to Aave’s Lido Market, with an initial debt ceiling of $100 million. In July, Aave partnered with Lido, the leading Ethereum staking protocol, to create a lending market for wstETH, a liquid staking derivative (LSD) representing a claim on Lido’s ETH staking pool.
The D3M would enable Sky to mint USDS directly into Aave’s market without needing to meet the usual collateral requirements.
“Aave is the largest lending market in DeFi with over 11b in TVL across multiple chains. This presents a lot of synergies between the two protocols with USDS being the largest decentralized stablecoin,” Phoenix said.
“We view this as a first step to a deeper relationship with Aave to promote both protocols as the core of scalable DeFi,” Phoenix added.
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