MakerDAO, a decentralized finance (DeFi) protocol and the issuer of stablecoin DAI, has unveiled a new lending and borrowing system called “Spark Protocol”.
How Will Spark Boost Lending And Borrowing?
The Spark Protocol will act as a “lending marketplace,” providing users with supply and borrowing features for cryptocurrencies such as Ethereum (ETH), staked Ether (stETH), DAI, and staked DAI (sDAI). Starting from May 9, the Spark Protocol will be accessible to all DeFi users allowing borrowers to take DAI loans at a 1.11% annual rate.
Announcing the Spark Protocol launch ⚡️
Starting May 9, 2023, Spark Protocol will be available to all DeFi users.
An end-user, DAI-centered DeFi product deployed on Ethereum with supply and borrow features for ETH, stETH, DAI, and sDAI. pic.twitter.com/oLa8oeBmL1
— Maker (@MakerDAO) May 8, 2023
The new lending protocol promises to enhance MakerDAO’s DAI lending capabilities, increase liquidity, offer users improved rates, offer a yield-bearing version of DAI, and provide more liquidity options.
According to the announcement, Spark has been integrated with MakerDAO’s Direct Deposit Dai Module (D3M), a technology that enables interaction between the Maker ecosystem and third-party lending pools. This liquidity balancing system uses DAI to keep liquidity in Spark Lend.
In addition, Spark will integrate with MakerDAO’s Peg Stability Module, enabling instant conversion of DAI to USDC at a 1:1 ratio for users seeking stablecoin swaps. MakerDAO tweeted,
“Spark Protocol is one of many innovations the Endgame Era will bring to the MakerDAO ecosystem, enabling a new groundbreaking solution that could only have arisen from the connection between a DeFi product and the Maker Protocol.”
Spark Protocol is one of many innovations the Endgame Era will bring to the MakerDAO ecosystem, enabling a new groundbreaking solution that could only have arisen from the connection between a DeFi product and the Maker Protocol:
— Maker (@MakerDAO) May 8, 2023
MakerDAO Rises With DeFi Popularity
This comes shortly after MakerDAO approved opening a real-world asset (RWA) vault for Coinbase Custody and the transfer of up to $500 million in USDC stablecoins. It is part of an earlier decision to transfer up to $1.6 billion USDC to Coinbase, as part of its strategy to diversify its reserves and increase revenues by investing in yield-generating traditional financial assets.
Furthermore, earlier this year, MakerDAO approved a new constitution to formalize governance processes and secure DAI stablecoin. The lending protocol claimed the primary purpose of this constitution is to establish formal governance processes and prevent hostile individuals from taking control of the protocol.
MakerDAO is a decentralized autonomous organization (DAO) that enables collateralized crypto lending on the Ethereum blockchain through smart contracts. It functions around DAI, which is soft-pegged to the US dollar and backed by locked-up crypto assets such as ETH and wBTC, among others. The DeFi protocol made its presence known in the aftermath of the UST-Terra crash when users were loading up on DAI, with the stablecoin trading at a premium for a brief moment in May 2022.