MakerDAO, one of the first decentralized finance (DeFi) Protocols built and established in the Ethereum blockchain, plans to launch Spark Lend (SL), a lending market focused on “liquid, decentralized, and high market cap assets.” 

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The team formerly known as Crimson Cluster is announcing the launch of Phoenix Labs, a research and development company building the Spark Protocol, which according to the MakerDao developers, will bring significant structural changes to both the Maker Protocol and MakerDao itself. Per the announcement:

That’s why we decided to create Phoenix Labs to support this new phase of growth and innovation by looking outwards and challenging our culture of building in-house because only together can we achieve greatness. We want to bring new decentralized products to Maker and start building for the future Creator subDAOs.

A Rising Tide Lifts All Boats

Phoenix Labs is focused on vertically integrating existing products into Maker and sharing the value creation with developers. Everything Phoenix Labs builds has the protocol’s native stablecoin DAI at its core.

MakerDao will own every product that Phoenix Labs builds. Once the “Creator subDAO” model is established, the Spark Protocol will transition to one of them. 

The Spark Protocol will extend MakerDao’s capabilities to offer a “liquid market” to supply and borrow scalable crypto assets at fixed rates, supporting EtherDAI, a stable and decentralized stablecoin on the Ethereum blockchain.

According to the announcement from the MakerDAO governance forum, the Spark protocol will evolve, adding new features that integrate Maker’s products as they become available to the most innovative DeFi solutions in the crypto space. 

Spark Lend will integrate Maker’s Direct Deposit Module (D3M), the key differentiator from existing lending protocols, and the Peg Stability Module (PSM). Following the launch of Spark Lend, Phoenix Labs aims to deliver new products and features in 2023. 

Features on the roadmap include Spark Fixed Rates, Resilient Oracles, cross-chain support, maker teleport support, and bootstrapping EtherDAI.

Spark Lend will focus on liquid, scalable collateral types; SL will not compete with markets that offer “tail assets.” SL will strive to be the most secure platform in all of DeFi.

SL will support the following markets on launch:

• DAI
• ETH [E-Mode Enabled]
• Lido wstETH [E-Mode Enabled]
• WBTC
• Savings DAI (DSR-locked DAI) [Collateral Only]

MarkerDAO’s Spark Lend, An Aave Killer?

The DeFi researcher, who goes by the pseudonym Ignas, stated that launching the Spark Lend protocol would create a platform to directly compete with the Ethereum DeFi protocol Aave. The general expectation was that Aave or another DeFi protocol known as Compound would integrate DSR and USDC holders and move to DAI. 

For the researcher, that hasn’t happened. Instead, Maker is forking Aave v3 with DSR integration and EtherDAI. Spark Lend will be built upon the Aave v3, and 10% of the revenue generated with the protocol will be sent to AaveDAO in exchange for all the hard work, according to the protocol engineer Sam Macpherson at MakerDao. 

On the other hand, Aave is set to launch its DeFi stablecoin GHO, a clear competitor to $DAI. Curve is also launching a stablecoin called crvUSD, and Curve is “crucial for DAI’S liquidity on-chain.”

The Spark Protocol is set to launch in April, depending on a governance vote. It will open a DAI lending vault on MakeDAO, with a $200 million debt. It also marks a milestone for Maker, as Spark will be the first native Maker-based lending interface.

Maker’s native token MKR has dropped 1.1% in the last 24 hours, trading at $757 at the time of writing. Still, MKR is in the green territory in the previous seven days, with a gain of 13.4% and 23% over the last 30 days.

Feature image from Unsplash, chart from TradingView.