Spark, based on the DAI stablecoin, is a new DeFi lending mechanism created by MakerDAO.
In an effort to further develop decentralized borrowing options for its stablecoin, MakerDAO has introduced Spark, a DeFi lending platform.
With a market worth of $4.7 billion, DAI is the fourth most valuable stablecoin after USDT, USDC, and BUSD.
MakerDAO now has the ability to engage in direct lending thanks to Spark, a software fork of the most popular lending protocol, Aave Version 3. Users may utilize ether (ETH), staked ether (stETH), and DAI to secure DAI loans using Spark. In contrast to MakerDAO’s main mechanism, which only lets users create new DAI as overcollateralized debt, Spark may be used in isolation.
As of tomorrow, Tuesday, all users of decentralized finance (DeFi) will have access to the Spark Protocol thanks to MakerDAO’s efforts.
Spark’s introductory APR for DAI loans is 1.11% per year. Instead of having interest rates fluctuate based on supply and demand, as is the case with Aave and other lending protocols, the lending platform implements a customized interest rate model in which borrowing rates are decided by governance members through on-chain voting.
Spark will be able to instantly convert DAI to USDC at a 1:1 ratio thanks to its integration with MakerDAO’s Peg Stability Module. Phoenix Labs, a MakerDAO partner company, spearheaded the development of Spark.
