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MakerDAO proposes Spark Protocol focused on DAI: ‘Endgame plan’

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  • Maker’s governance forum had a proposal posted on Wednesday about Spark Protocol. 
  • It would allow lending and borrowing assets focused on DAI. 
  • The proposal is a part of the ‘Endgame plan.’

As per the proposal posted on Maker’s governance forum on Wednesday, the community participants of the MakerDAO community have proposed creating a liquidity market called Spark Protocol. Allowing lending and borrowing crypto assets focused on DAI, Maker’s $5 billion stablecoin.

The Spark Protocol

The initial product of the protocol would be Spark Lend, allowing its users to borrow DAI at a set DAI Savings Rate, the current position of which is 1%. The proposal highlights that it will support highly liquid decentralized assets as collateral, ETH, for instance. DAI and wrapped derivatives of the staked ETH (wstETH) and wrapped Bitcoin (wBTC). The upcoming features will include fixed-term yield products along with the involvement of their own synthetic liquid staking derivative (LSD), also known as EtherDAI. 

Source: Maker’s governance forum

The expected launch time is April 2023, with the DAI lending vault opening on Maker and a debt ceiling of $200 million. The smart contracts of Aave V3 would be used, while the Phoenix Labs developer team intends to send 10% of the profits earned on the Spark Protocol’s DAI market to Aave DAO for the next two years. Its implementation is liable to voting by the Maker community. 

Maker’s breakthrough

MakerDAO has emerged as the largest DeFi protocol; additionally, the $5 billion DAI stablecoins are backed by nearly $7 billion of treasury assets. Aave became the top lending protocol with a TVL of $7.2 billion locked on the platform. Both of them are managed by a DAO through voting. The ones holding governance tokens can either support or contradict the proposal. 

Source: Defilamma

The breakthrough here is for Maker because Spark would be the initial native Maker-based lending interface, which can be used by any crypto user for interaction, connecting with their crypto wallets and facility of directly borrowing from Maker. 

Boosting the Revenue

Spark intends to fill the revenue basket for Maker by facilitating lending and borrowing activity. The efforts at boosting the revenue stream are ongoing, allocating a part of their $7 billion reserve assets towards numerous yield-generating strategies. For instance, a partnership with Coinbase’s custody platform & investment in US government bonds. A part of the extra revenue is distributed among DAI holders, with an offer of a 1% annual award, also known as the DAI Savings Rate. 

The Proposal

It is built on the “Endgame plan,” a controversial plan by Rune Christensen, founder of Maker. It suggests a breakup of the management structure of MakerDAOs in its SubDAOs or smaller blocks. Phoenix Labs is working behind the Spark Protocol, a newly created company focused on developing new products atop the Maker protocol. 

Sam MacPherson, CTO of Phoenix Labs and famed contributor at Maker, says that:

“As part of the Endgame plan, multiple competitive SubDAOs are being formed next year with associated tokens that are linked to cash flows from the SubDAO products.”

The proposal further hints that the Maker community would fully own the Spark protocol. After establishing the Creator subDAO model, it could be transitioned to either of them.

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