On May 9, 2023, Spark Protocol will officially launch, providing a brand new decentralized finance (DeFi) solution for users seeking supply and borrow features for ETH, stETH, DAI, and sDAI. Spark Protocol’s first version, Spark Lend, will be a lending marketplace that aims to connect Maker’s liquidity with a complete DeFi solution.
What is Spark Protocol?
Spark Protocol is an end-user, DAI-centered DeFi product that has been deployed on Ethereum. Its users will be able to interact with Spark’s front-end directly, allowing them to supply and borrow crypto easily. Spark Protocol is one of many innovations that the Endgame Era will bring to the MakerDAO ecosystem, enabling groundbreaking solutions that could only have arisen from the connection between a DeFi product and the Maker Protocol.
How Does Spark Protocol Work?
Spark Protocol is connected to Maker’s D3M, which provides a direct wholesale credit line in DAI. This injects and automatically balances fresh DAI liquidity into Spark Lend, enabling its users to access the best rates in the market. Through Spark Lend, users can now borrow DAI at an initial 1.11% annual rate due to the direct injection of liquidity from Maker. Rates do not increase with utilization, no matter what your size is!
Spark Protocol also introduces a tokenized version of DAI deposited in the DSR — Savings DAI (sDAI). Through Spark Lend, users can now employ a yield-bearing version of DAI that is automatically connected to the Dai Savings Rate module. It’s worth noting that the Dai Savings Rate’s percentage yield is at 1.00% and may change via Maker Governance’s on-chain voting, which would directly affect Spark Lend’s DAI rates.
Additionally, Spark Protocol is connected with Maker’s PSM, which connects massive liquidity infrastructure for instant swapping of DAI and sDAI for USDC, and vice versa, at a 1:1 rate. This means users can now enter DSR from USDC!