According to an announcement on September 2, decentralized finance (DeFi) protocols Aave and Sky (formerly Maker) are exploring a partnership designed to “bridge the gap between DeFi and TradFi.”
The proposed partnership, dubbed Sky Aave Force, follows a governance proposal put forth by DeFi research and development firm Phoenix Labs on September 2. The proposal proposes that Sky’s sub-DAO, Spark, issue its own SPK token to help establish a market for the USDS stablecoin, which launched after Maker rebranded to Sky in August.
“Sky Aave Force has an ambitious goal: to drive mass adoption and bridge the gap between DeFi and TradFi. Now is the time to work together,” said Aave Labs, the developer of the Aave DeFi lending platform.
Sky Aave Force aims to bridge DeFi and TradFi. Source: Aave Labs
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Phoenix Labs proposes to distribute up to 3.33 million SPK tokens per month to incentivize Aave v3 markets for Sky’s sUSDS, a yield-generating token representing deposits in the Sky Savings Rate (SSR) program. SSR will provide depositors with returns from the yield generated by the Sky protocol, similar to the previous DAI Savings Rate (DSR) program.
Phoenix Labs stated that as proposed, Aave’s idle sUSDS “consistently earns the Sky Savings Rate (SSR), allowing the market to outperform its USDC/USDT counterpart.”
The proposal also introduces a USDS Direct Deposit Module (D3M) to Aave’s Lido Market, and proposes an initial debt ceiling of $100 million. In July, Aave partnered with Lido, a leading Ethereum staking protocol, to create a lending market for wstETH, a liquid staking derivative (LSD) representing claims on Lido’s ETH staking pool.
D3M allows Sky to issue USDS directly on the Aave marketplace without having to meet the usual collateral requirements.
“Aave is the largest lending marketplace in DeFi with over 11b TVL across multiple chains. This provides a lot of synergies between the two protocols, and USDS is the largest decentralized stablecoin,” Phoenix said.
“We see this as a first step toward a closer relationship with Aave to promote both protocols as key enablers of scalable DeFi,” Phoenix added.
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