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DeFi Pioneer MakerDAO Announces Aave Competitor Spark Protocol

2 mins
Updated by Kyle Baird
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In Brief

  • Spark Protocol will leverage DAI for liquidity.
  • Spark Lend will be the first protocol product.
  • MKR prices have dropped 4.6% today.
  • promo

Decentralized finance (DeFi) stablecoin platform MakerDAO has proposed Spark Protocol. The new system is based on the Aave lending protocol’s smart contracts.

On Feb. 8, the Spark Protocol proposal was posted on the MakerDAO governance forum. The protocol plans on leveraging Maker’s DAI stablecoin and its crypto assets for liquidity. 

It stated that Spark Protocol will “amplify the features of MakerDAO by enabling a liquidity market for supplying and borrowing scalable crypto assets with variable and fixed rates.”

Its first product will be Spark Lend. This builds on Aave v3, allowing users to borrow DAI at a set DAI Savings Rate (DSR), currently 1%. Spark Lend will support highly liquid crypto assets as collateral, such as ETH, DAI, and wrapped derivatives.

DeFi researcher ‘Ignas’ delved into the details of Maker’s new DeFi ecosystem.

MakerDAO Takes Aim at Rivals

The researcher noted that there was an expectation that Aave or Compound would integrate DSR, and USDC holders would move to DAI. However, that hasn’t happened.

Therefore, MakerDAO has decided to go it alone with a new ecosystem. Furthermore, Aave is about to launch its DAI rivaling stablecoin, GHO. Compound also launched its version 3 with only USDC supported for borrowing, while other crypto assets are supplied as collateral, the researcher noted.

The developers of Spark, Phoenix Labs, aim to continue delivering new products and features. The ones scheduled on the 2023 roadmap include Spark Fixed Rates, Resilient Oracles, cross-chain support, Maker teleport support, and bootstrapping of EtherDAI.

EtherDAI is Maker’s soon-to-be-launched synthetic liquid staking derivative.

Furthermore, the proposal acknowledged the protocol’s Aave roots and pledged to send some profits back to the DeFi lender.

“In exchange for all the hard work done at AaveDAO, Spark Protocol will send 10% of the profits earned on the DAI market for the next two years.”

Spark Protocol is expected to launch in April, pending a governance vote. It will open a DAI lending vault on Maker at that time with a $200 million debt ceiling.

Moreover, it marks a milestone for Maker since Spark will be the first native Maker-based lending interface.

Price Outlook

Maker’s native token, MKR, has taken a hit today with the broader market retreat. As a result, MKR is down 4.6% on the day, trading at $777 at the time of press.

The DeFi token has gained 25% over the past month and 16% over the past week.

MKR/USD 1 month - BeInCrypto
MKR/USD 1 month – BeInCrypto

However, MKR remains down 87.7% from its all-time high of $6,292 in May 2021. Furthermore, the current circulation of DAI is $5.1 billion making it the fourth-largest stablecoin by market cap.

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...