DeFi protocols Aave and Sky (formerly Maker) are exploring a partnership called Sky Aave Force to bridge DeFi and TradFi, backed by a Phoenix Labs proposal to issue SPK tokens for Sky’s stablecoin USDS.
According to an announcement made on September 2, Aave and Sky (formerly Maker), two decentralized finance (DeFi) protocols, are investigating a partnership that is intended to “bridge the gap between DeFi and TradFi.”
Phoenix Labs, a DeFi research and development organization, submitted a governance proposal on September 2 that led to the proposed partnership, known as the Sky Aave Force.
The proposal recommends the issuance of SPK tokens, which are native to Sky’s subDAO, Spark, in order to facilitate the establishment of a market for USDS, a stablecoin that was introduced following Maker’s August rebranding to Sky.
“Sky Aave Force has a bold objective: to accelerate the adoption of DeFi and bridge the gap between DeFi and TradFi.” Aave Labs, the developer of the Aave DeFi lending platform, stated, “The time to collaborate is now.”
In order to promote an Aave v3 market for Sky’s sUSDS, a yield-bearing token that represents deposits in the Sky Savings Rate (SSR) program, Phoenix Labs suggests distributing up to 3.33 million SPK tokens per month.
SSR, like its antecedent, the DAI Savings Rate (DSR) program, offers depositors a yield from the revenues generated by Sky’s protocol.
Phoenix Labs stated that idle sUSDS on Aave “consistently earns the Sky Savings Rate (SSR), allowing the market to outperform the USDC/USDT counterparts” as proposed.
The proposal also recommends the implementation of a USDS Direct Deposit Module (D3M) in Aave’s Lido Market, with an initial debt ceiling of $100 million. In July, Aave formed a partnership with Lido, the premier Ethereum staking protocol, to establish a lending market for wstETH, a liquid staking derivative (LSD) that represents a claim on Lido’s ETH staking pool.
The D3M would allow Sky to directly mint USDS into Aave’s market without the need to satisfy the standard collateral requirements.
“Aave is the most significant lending market in DeFi, with over 11 billion in TVL across multiple chains.” Phoenix stated that USDS is the largest decentralized stablecoin, which presents numerous synergies between the two protocols.
Phoenix further stated, “We regard this as the initial step in establishing a more substantial partnership with Aave to advance both protocols as the foundation of scalable DeFi.”
