Spark protocol deploys new DAI markets on Morpho’s lending protocol

Spark, a Maker SubDAO-built DeFi infrastructure, has deployed $100 million in new DAI liquidity with Morpho Blue, Morpho’s lending protocol. This move allows users to borrow Ethena’s stablecoins, USDe and sUSDe, at highly efficient leveraged positions backed by MakerDAO.

Ethena’s USDe is denominated in the US dollar and backed by crypto-native collateral custodied by institutional custodians, including Fireblocks, Copper, Ceffu and Cobo. sUSDe is a value accruing “internet bond,” or a staked version of the USDe asset.

In addition to creating new DAI markets, a DAI vault has been built on MetaMorpho, a protocol that enables vaults to be created on Morpho Blue to ensure that DAI liquidity is allocated to these markets. Performance fees on the vault will be initially set to zero, and Maker’s Direct Deposit Module (DDM) will receive all fees accrued.

Read more: Maker moves to meet demand for DAI

This collaboration has mostly been driven by MakerDAO’s endgame plan, with Spark protocol being part of a newly formed SubDAO in the Maker ecosystem. Sam MacPherson, the CEO and co-founder of Phoenix Labs — the infrastructure company behind Spark — noted in a press release reviewed by Blockworks that this collaboration will unlock novel opportunities for the DeFi lending ecosystem.

“MakerDAO’s groundbreaking SubDAO dynamic has enabled this development as well as the overall rapid growth of Spark. It is a testament to the efficiency of DeFi when a new product launches with a killer value proposition and succeeds in the manner which Spark has done,” MacPherson said.

While SparkLend’s initial lending infrastructure utilized Aave v3’s codebase, the decision to expand its capabilities using Morpho is driven by the programmability of Morpho Blue, which enables its users to choose risk parameters and customize lending pools. 

“It’s exciting to see Morpho’s trustless and efficient infrastructure approach to lending being embraced by DeFi’s largest and fastest-growing protocols.” Morpho Labs CEO and co-founder Paul Frambot remarked in a press release. “Users will be able to borrow DAI with a much broader diversity of collateral, greatly expanding the scope of lending and borrowing opportunities for users.”

Maker’s decision to work with Morpho comes soon after blockchain analytics company Gauntlet terminated its contracted work as risk steward for Aave and became a Morpho Labs risk curator. It also follows Aave’s decision to exclude Morpho users from its latest alignment reward program.

Updated April 1, 2024 at 4:29 pm ET: Clarified Ethena’s USDE denomination in USD and collateralization with institutional custodians.

---

Get the news in your inbox. Explore Blockworks newsletters:

• The Breakdown: Decoding crypto and the markets. Daily.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• 0xResearch: Alpha directly in your inbox.
• Lightspeed: All things Solana.
• The Drop: Apps, games, memes and more.
• Supply Shock: Bitcoin, bitcoin, bitcoin.