Originally published on: September 03, 2024
A new partnership between decentralized finance (DeFi) giants Aave and Sky aims to bridge the gap between DeFi and Traditional Finance, as announced on September 2nd.
Dubbed the Sky Aave Force, this proposed collaboration follows a governance proposal by Phoenix Labs, a DeFi research and development organization. The plan involves issuing SPK tokens from Sky’s subDAO, Spark, to create a market for USDS, a stablecoin introduced after Sky’s rebranding from Maker.
“Aave Labs, the brains behind the Aave DeFi lending platform, envisions the ambitious goal of driving mass adoption and closing the chasm between DeFi and TradFi. The time to collaborate is now,” stated Aave Labs.
The Sky Aave Force project has its sights set on uniting DeFi and TradFi. Source: Aave Labs
Phoenix Labs has proposed the distribution of up to 3.33 million SPK tokens monthly to incentivize the creation of an Aave v3 market for sUSDS, a yield-generating token linked to Sky’s Savings Rate (SSR) program. This program, akin to the DAI Savings Rate (DSR), offers depositors a yield from protocol-generated revenues.
According to Phoenix Labs, idle sUSDS on Aave would consistently earn the SSR, potentially outperforming USDC/USDT markets.
Additionally, the proposal suggests implementing a USDS Direct Deposit Module (D3M) into Aave’s Lido Market, with an initial debt ceiling of $100 million. Aave previously partnered with Lido in July to launch a lending market for wstETH, a liquid staking derivative tied to Lido’s ETH staking pool.
The D3M would allow Sky to mint USDS directly into Aave’s market without traditional collateral requirements.
“With over $11 billion in Total Value Locked (TVL) across multiple chains, Aave stands as the largest lending market in DeFi. The synergies between the two protocols, coupled with USDS being the leading decentralized stablecoin, make this collaboration significant,” Phoenix Labs expressed.
“We see this as a stepping stone towards a deeper relationship with Aave to elevate both protocols as the foundation of scalable DeFi,” added Phoenix.
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