The Block reports: Spark Protocol, the lending sub-DAO of the Sky ecosystem, has allocated up to $1.1 billion of its Spark liquidity layer balance sheet to Ethena’s USDe and sUSDe tokens.
The team estimates that “under favorable market conditions” they could earn around 27% APY, contributing to Sky’s revenue growth and maximizing returns for savings USDS depositors.
Sky (formerly MakerDAO) subsidiary Spark Protocol will integrate Ethena’s USDe synthetic dollar into its “liquidity layer,” the protocol team announced on Tuesday. As part of the partnership, Spark plans to allocate up to $1.1 billion of its balance sheet to Etena’s yield-bearing tokens to increase “capital efficiency.”
Launched in early 2024, USDe is a unique product in the stablecoin space as it remains pegged to the US dollar through algorithm-based trading. One of the reasons it has quickly grown to become the No. 4 stablecoin is that, like other on-chain stablecoin products, profits are paid out on users’ holdings, unlike corporate-backed assets such as Tether. It’s to get caught.
Prior to this latest move, Spark Liquidity Layer’s balance sheet was limited to Circle’s stablecoin, Sky and sUSDS tokens. Spark estimates that by incorporating Ethena’s USDe and sUSDe tokens directly into its portfolio, it could earn approximately 27% APY “under favorable market conditions.”
“The addition of Ethena demonstrates Spark’s commitment to innovation and scalability,” the Spark team wrote in a blog post. “By enhancing liquidity management and revenue generation, Spark solidifies its vision to become a revenue engine for DeFi.”
This is Spark’s first step towards additional proposed protocol allocation through the Spark Liquidity Layer. Spark Liquidity Layer is a multi-chain system launched late last year to facilitate access to Sky’s yield-bearing savings USDS stablecoin through other DeFi protocols, the team said.
“By integrating Ethena’s USDe and sUSDe into its balance sheet, Spark is poised to add significant yield opportunities to its infrastructure and maximize benefits for Savings USDS depositors and the Spark ecosystem.” the team said.
The Spark Liquidity Layer, which manages $6.2 billion in stablecoin liquidity, allows users to transfer Circle’s USDC stablecoins to Sky’s USDS or high-yield “Savings USDS” (sUSDS) stocks on any supported network. Can be converted into table coins. Savings USDS pays a stable fee determined by Sky’s governance DA. The current interest rate of around 12.5% is supported by Sky’s revenue streams, including over-collateralized DeFi loans and real-world investments.
USDS, currently the third largest stablecoin by market capitalization, is fully convertible to MakerDAO’s original dollar-pegged token dai, which has fallen to the fifth largest stablecoin.
Spark has had exposure to Etena’s USDe and sUSDe tokens since March through its overcollateralized Morpho vault. In December, the protocol’s DAO considered adjusting its risk exposure to the network.
“Given Athena’s significant growth over the past few months and given that USDe supply currently exceeds USDS, we recommend adopting a more stringent total exposure threshold of 20% of USDe supply.” , the team wrote, noting that this equates to approximately $1.05 billion. USDS.
Ethena, on the other hand, claims to have contributed around $120 million in annual revenue to the Sky ecosystem. In December, Ethena joins its new USDtb stablecoin in Spark’s $1 billion tokenization grand prize, which aims to incorporate real-world assets into DeFi by providing capital to selected participants. Submitted a bid. The USDtb token will ultimately be backed by US government bonds via BlackRock’s BUIDL fund.
Spark was spun out of MakerDAO as part of protocol founder Rune Christense’s “endgame” plan. The plan was to boost the ecosystem’s profits by launching semi-independent “subDAOs” that would function like startups. Since its launch, Spark Money Market has generated approximately $232 million in annual revenue for the Sky ecosystem.
