As Aave’s stablecoin GHO and Curve’s stablecoin crvUSD are about to launch, MakerDAO is preparing to expand its lending business through Phoenix Labs and Spark Protocol, and enter the liquid staking market.
On February 9, the announcement of the establishment of Phoenix Labs and the development of Spark Protocol was made on the MakerDAO forum, focusing on the decentralized lending market. How do Phoenix Labs and Spark Protocol work, and how do they help MakerDAO? Currently, the Spark Protocol official website does not provide detailed information. This article is based on an understanding of the MakerDAO forum and the founders of Spark Protocol. What are Phoenix Labs and Spark Protocol? After MakerDAO founder proposed the Endgame plan last June, MakerDAO needed to continue expanding while maintaining maximum flexibility. Therefore, some core unit team members of MakerDAO created Phoenix Labs. Phoenix Labs is a research and development company aimed at introducing new decentralized products into the Maker ecosystem. All products developed by Phoenix Labs will be owned by MakerDAO, inherit Maker’s governance system, and be managed through Maker Governance via voting on smart contracts. Spark Protocol is the first solution from Phoenix Labs. It will enable fixed and variable rate lending for crypto assets, support EtherDAI, and implement elastic oracles to enhance MakerDAO’s functionality. After the Creator SubDAO model is established within MakerDAO, Spark Protocol will transition into a Creator SubDAO. Related Reading: MakerDAO’s Crisis and Opportunity: Losses, Regulatory Risks, and the Redemption of MetaDAO Spark Lend: A Lending Market Forked from Aave V3The first product of Spark Protocol is Spark Lend, a lending market with a frontend. According to the officially published roadmap, the basic functions of Spark Protocol, including product launch, will be completed in April this year. This year will also see the addition of fixed-rate lending, elastic oracles, cross-chain support, and the onboarding of EtherDAI. Spark Lend is built on top of Aave V3. Spark Protocol will allocate 10% of the profits earned from the DAI market to Aave for the two years following DAI borrows reaching $100 million. Spark Protocol has already submitted a proposal on the Aave forum. Spark Lend supports Maker’s D3M and PSM, allowing the project to access cheap liquidity, and enabling others to borrow DAI at the DAI Savings Rate (DSR). The DSR allows users to deposit DAI and earn deposit interest, which is currently 1% per annum. USDC holders can also use the Spark Protocol official website to convert USDC to DAI directly via PSM and earn interest through the DSR. Spark Lend will focus on highly liquid collateral types and will support borrowing and lending across the following five markets at launch: DAI, ETH, Lido wstETH, WBTC, and DSR-locked DAI. Among these, ETH and wstETH will support Aave V3’s E-Mode, allowing users to borrow up to 98% of ETH against wstETH collateral, enabling higher leverage. In the second half of this year, Spark Protocol plans to collaborate with Deco, Sense Finance, Element Finance, and others to support fixed-rate lending. Onboarding EtherDAI Under the Endgame plan, Maker has decided to create EtherDAI, a liquid staking derivative (LSD) for ETH. With the Shanghai upgrade approaching, staked ETH will become withdrawable, which is considered a good opportunity to enter the LSD track.
One of the primary goals of Spark Protocol is to guide the adoption of EtherDAI.
According to Spark Protocol’s liquid staking scheme, EtherDAI will be similar to Frax Finance’s liquid staking model, featuring an EtherDAI token pegged 1:1 to ETH and a yield-bearing version called sEtherDAI. Since only a portion of the staked tokens share all staking rewards, the yield of sEtherDAI may be higher than other LSDs, just like sfrxETH. Additionally, EtherDAI will also have a PSM. In Maker, the PSM allows 1:1 swaps between tokens such as USDC and GUSD with DAI. Here, the PSM will allow ETH or other ETH liquid staking derivatives to be easily converted into EtherDAI. To support the rapid launch of EtherDAI, Maker could also provide liquidity mining subsidies for EtherDAI in the form of MKR or DAI. Issuing New Tokens In previous Endgame discussions, Maker decided to split its core units into individual MetaDAOs due to high employee costs and the urgent need for expansion. Each MetaDAO is required to be self-sustaining and will issue its own tokens. Although Spark Protocol did not introduce token-related details on the MakerDAO forum, it may have its own token. The founder of Phoenix Labs mentioned on Twitter that there will be multiple competitive SubDAOs, with related tokens linked to the cash flow of SubDAO products. Revenue generated by Spark Protocol will flow to these token holders. All tokens will be distributed through liquidity mining, with no pre-allocation. Compared to the past, after the establishment of SubDAOs such as Spark Protocol, Maker’s cost expenditures will decrease, and each SubDAO will continue to work within the Maker ecosystem. After various SubDAOs issue their own tokens, existing assets in MakerDAO such as MKR and DAI may also become mining tools, which could also be a reason for the recent rise in MKR.Tokens issued by a SubDAO may possess the right to claim revenue distributions from their own projects. Summary Core members of MakerDAO have established Phoenix Labs and developed Spark Protocol. Spark Protocol will initially feature a lending market forked from Aave V3, which can obtain liquidity at low cost through support for D3M and PSM. Another important objective is to drive adoption of Maker’s liquid staking derivative, EtherDAI. Once SubDAOs such as Spark Protocol are established, they may significantly alleviate MakerDAO’s cost pressures. SubDAOs will issue their own tokens, and these tokens will be fairly distributed through liquidity mining, with MKR and DAI potentially serving as mining tools. Disclaimer: This article only represents the author’s personal views and opinions, and does not represent the position or stance of this website. All content and views are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions. The author and this website shall not bear any responsibility for direct or indirect losses arising from investor transactions. Disclaimer: This article is solely for providing market information. All content and views are for reference only and do not constitute investment advice, nor do they represent the position or stance of this website. Investors should make their own decisions and transactions. The author and this website shall not bear any responsibility for direct or indirect losses arising from investor transactions.
