A quick look at the Sky Aave Force proposal announced by Aave Labs

Source: Aave Labs, Makerdao Forum; Compiled by Wuzhu, Golden Finance

On September 3, 2024, Aave Labs announced the introduction of Sky Aave Force on Twitter.

The Twitter content is as follows:

Sky Aave Force is an initiative launched by @runekek and @stanikulechov with an ambitious goal: to drive mass adoption and narrow the gap between DeFi and TradFi. Now is the time to collaborate.

As @StaniKulechov said, DeFi protocols have matured, showing resilience and market fit. Through collaboration, DeFi can become the backbone of all finance, enabling unprecedented access and driving new use cases.

We are no longer bystanders; DeFi can empower all finance.

Sky Aave Force will propose:

• Integrate USDS and Savings USDS (sUSDS) on Aave V3 with native token rewards.

• Creation of a new @sparkdotfi / Aave marketplace for seamless interactions and exclusive rewards.

Sky Aave Force marks the first step towards a coordinated, more resilient ecosystem with a key agenda: broader accessibility, adoption, and collaborative progress.

Makerdao (now renamed Sky) also has proposals on the forum:

Spark Integration Proposal with Aave

After ACI’s temporary inspection of adding sUSDS to the Aave V3 Main Market and adding USDS to the Lido Market, Phoenix Labs proposed the following:

sUSDS supply on the Aave V3 Main Market is eligible for the SPK pre-farming airdrop incentive program, with monthly rewards of 3.33 million SPK tokens (50% of SparkLend).

USDS D3M to the Aave Lido Market, with an initial debt cap of 100 million to increase adoption.

Rationale

Aave is the largest lending market in DeFi, with a TVL of over 11 billion across multiple chains. This brings many synergies to both protocols, with USDS being the largest decentralized stablecoin. We see this as the first step in a deeper relationship with Aave, aimed at promoting both protocols as core to scalable DeFi.

The Aave Protocol team has agreed to split revenue from the sUSDS and USDS markets equally with Spark.

1. sUSDS Incentive Program

sUSDS is used as a primary market asset to improve capital efficiency for lenders. Idle supply continuously earns the Sky Savings Rate (SSR), allowing the market to outperform its USDC/USDT peers. Additionally, debt is denominated in the yield version, so the minimum borrow rate is SSR.

The following formula will be used to prevent USD stablecoin recycling: sUSDS Supply - Sum_i(Stablecoin_i Borrowed Amount (in USD) / Stablecoin_i Liquidation Threshold)

The program will help Sky drive adoption of USDS after launch, and the incentive program will increase Aave's TVL and revenue by attracting new borrowers.

The Aave team has agreed to set rewards on the sUSDS market and will update its UI to display SPK rewards.

2. USDS D3M Goes to Lido Market

Aave recently launched a dedicated instance of Lido for its V3 Market 2. Phoenix Labs, in partnership with Aave and Lido, proposes to deploy D3M in this market to promote the adoption of USDS and wstETH. An initial debt cap of 100 million is proposed, which is expected to be used until interest rates are in line with the broader market.

The collateral on the market will be ETH and wstETH which are extremely liquid, so we expect this debt ceiling to be raised to meet demand. If for some reason demand is insufficient, liquidity can be removed if borrowing rates remain below SOFR.

D3M will use the following contracts:

• D3MAaveV3USDSNoSupplyCapTypePool 2

• D3MOperatorPlan (Operator: 0x298b375f24CeDb45e936D7e21d6Eb05e344adFb5 1)

The Operator Plan will allow the governance facilitator multisig to adjust exposure to meet demand at a faster cadence than the staking process.

Next Steps

Pending approval from the governance process, both proposals will be implemented at the next available opportunity after the launch of USDS and sUSDS tokens on September 18th.

The SPK rewards program will be activated when the market enters the Aave V3 main market.

The relevant content from the AAVE forum is as follows:

[Temporary Check] Adding USDS and sUSDS to Aave v3

Summary

This proposal aims to include USDs and sUSDS, the renamed DAI and sDAI tokens into Aave v3.

Motivation

DAI has been a cornerstone asset in the Aave ecosystem, with a long and successful history of supply across versions of the protocol. MakerDAO rebrands to Sky, marking a significant milestone with the introduction of USDS and sUSDS as new iterations of DAI and sDAI. Given the strong track record and widespread adoption of their predecessors, we propose to include these new assets in Aave v3.

By integrating USDS and sUSDS into Aave v3, we aim to maintain continuity for users who rely on DAI and sDAI, while embracing the evolution of these assets under the Sky brand.

Liquidity and Proof of Deposit Commitment

The Sky Protocol team has discussed providing token incentives and liquidity provision when USDS is added. ACI is in discussions with Sky Protocol team members to finalize these plans.

Specification

Based on discussions with Sky Protocol team members, we propose the following:

• Add sUSDS as a collateral and borrow asset for Aave v3 Master instance

• Add USDS as a supply and borrow asset for Aave v3 Lido instance

• Integrate with Paraswap to allow users to seamlessly swap DAI and USDS variants within the Aave system.

We invite all service providers and community members to comment on these proposals.

The final contract address will be available at the final launch of Sky Protocol.

Risk service providers will provide risk parameters during the ARFC phase.

Next Steps

• If consensus is reached on this [interim check], promote this proposal to the snapshot stage.

• If the snapshot result is YAE, this proposal will be promoted to the ARFC stage.

• Publish a standard ARFC to collect feedback from the community and service providers before promoting the proposal to the ARFC snapshot stage.

• If the ARFC snapshot result is YAE, publish an AIP vote to finally confirm and execute the proposal.