Sky and Aave have reportedly declared a strategic partnership that will redefine decentralized finance (DeFi) and interact with conventional finance (TradFi). This collaboration, announced on September 2, 2024, through a governance proposal by Phoenix Labs, plans to incorporate Sky’s recently launched stablecoin, USDS. This partnership, named Sky Aave Force, reports claim that will establish markets that promote the adoption of DeFi products by integrating them with existing financial systems. The DeFi community looks forward to seeing what this merger between Sky and Aave will bring as they combine their forces.
Partnership to Drive DeFi Adoption
Sky, previously known as Maker, is one of the biggest names in the DeFi industry, mainly popular for its stablecoin DAI. However, after a period of time, the company underwent rebranding and introduced USDS, which is comparatively more stable and liquid. Based on the announcement, the collaboration with Aave is expected to involve the development of a market for USDS on the Aave platform. This proposal was created with significant input from Phoenix Labs, a research and development company within the decentralized finance niche.
As per the proposal, the creation of this market is recommended through the offering of SPK tokens, which originate from Sky’s subDAO, Spark. “Sky Aave Force has an ambitious goal: to reframe these solutions and achieve the ultimate goal of bringing Web3 to the masses and bridging DeFi and TradFi. Now is the time to collaborate,” said Aave Labs, emphasizing the importance of the partnership.
Innovative Features of the Sky Aave Partnership
Perhaps the most notable aspect of this alliance is the integration of a USDS Direct Deposit Module (D3M) into Aave’s Lido Market. As proposed, this feature will enable Sky to mint USDS for direct injection onto Aave’s market without meeting collateral requirements. Such flexibility is expected to increase the turnover of USDS among traders and investors, making it a favorable currency. It is also developing a strategy to distribute up to 3.33 million SPK tokens per month to incentivize users to engage in trading on the Aave v3 market for Sky’s sUSDS, which is yield-bearing and represents deposits in the Sky SSR program.
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This program is similar to Sky’s previously launched DAI Savings Rate (DSR) program, which received a positive reception in the DeFi sphere. The SSR program prioritizes yield for depositors from the revenues generated by Sky’s protocol, allowing sUSDS holders to earn stable revenues. Phoenix Labs spokespeople focused on this new approach, explaining that “Idle sUSDS on Aave earns the Sky Savings Rate (SSR), enabling the market to outcompete USDC/USDT counterparts and amass massive liquidity on Aave.”
Future Implications for the DeFi Market
Sky and Aave are not just building a new market for USDS, but they are creating a more significant trend of connecting DeFi to financial systems. In this way, both companies plan to make DeFi accessible to as many users as possible and attract institutional investors who have not engaged in decentralized finance due to high volatility and potential scams. Aave is among the largest lending protocols in the DeFi market, with nearly $11 billion in Total Value Locked (TVL), covering several blockchains.
Therefore, this partnership with Sky should add even more value to the platform and possibly bring new users, helping to boost the usage of DeFi protocols and platforms. The USDS Direct Deposit Module (D3M) and SPK tokens are designed to create a more saturated and stimulating environment for USDS to operate successfully. This is why the successful development of new applications may result in more collaborations between DeFi and TradFi businesses, eliminating the difference between these spheres.
Besides generating new gains for investors, the Sky-Aave partnership can also serve as a model for cooperation in further DeFi development. As more financial institutions venture into DeFi, such collaborations are expected to emerge more frequently, and the global financial system can be said to be well-connected.
Final Thoughts
The current partnership between Sky and Aave is a milestone to achieving greater advancements in decentralized finance. Through listing USDS on Aave for trading, both the companies are not only contributing towards the growth of the DeFi space but also working towards harmonising it with the global financial systems. In the future of finance collaborations as the Sky Aave Force will play a significant role as the DeFi ecosystem expands. Sky and Aave have set their sights high with their target to make a bridge between DeFi and TradFi possible and the future holds a bright promise for these two initiatives. Keep following TheBITJournal for latest crypto updates and developments.
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