Last Updated on May 9, 2023 by Bitfinsider

MakerDAO, the decentralized body in charge of the DAI stablecoin, has announced Spark, a DeFi lending platform designed to improve decentralized borrowing alternatives for its stablecoin.

With a market valuation of $4.7 billion, DAI is the fourth largest stablecoin, after only USDT, USDC, and BUSD.

Spark is a software fork of Aave’s Version 3 lending protocol that combines direct lending capabilities within MakerDAO. Users can receive DAI loans through Spark using assets like as ether (ETH), staked ether (stETH), and DAI. Spark is separate from MakerDAO’s main process, which only allows users to generate additional DAI as overcollateralized debt.

“Spark Lend, Spark Protocol’s first version, is a lending marketplace specifically designed for supplying and borrowing crypto with a focus on DAI,” MakerDAO explained. The Spark Protocol will be available to all decentralized finance (DeFi) users beginning Tuesday, according to MakerDAO.

Borrowers can initially obtain DAI loans from Spark for an annual rate of 1.11%. The lending platform has a customized interest rate model in which borrowing rates are set by governance members through on-chain voting rather than varying based on supply and demand as in Aave or other lending protocols.

Spark will interface with MakerDAO’s Peg Stability Module, allowing users looking for stablecoin swaps to instantly convert DAI to USDC at a 1:1 ratio. Phoenix Labs, a MakerDAO contributor, led the development of Spark.