Spark Protocol: MakerDAO's Gateway to Vertical Expansion | Sam MacPherson
Wed Jun 14 2023
Stablecoins and Revenue Distribution
- Stablecoins like Spark Protocol are gaining popularity because they allow protocols to direct revenue to different areas, unlike other products that require paying LPs the majority of revenue.
Vertical Integration and User Benefits
- The trend towards vertical integration in the crypto industry is seen as ultimately beneficial for users, as it allows for the creation of better products at cheaper rates.
Interview with Sam McPherson, Founder and CEO of Phoenix Labs
- The podcast features an interview with Sam McPherson, founder and CEO of Phoenix Labs, which is building Spark Protocol for MakerDAO's lending arm.
- Bitcoin and Ether have performed well in the market over the last seven days, while some altcoins like Solana and Polygon have seen significant price drops.
Proposed Bill to Restructure SEC
- A new bill called SEC Stables, proposed by House rep Warren Davidson, outlines a plan to remove Gary Gensler as SEC chair and restructure the SEC to no longer have a chair. Instead, six commissioners would have say over rulemaking, enforcement investigations, etc., with an additional executive director serving as a figurehead for day-to-day operations.
Concerns about SEC Regulations
- Congress is discussing crypto regulations, with some members expressing concerns about the SEC's approach.
- Many in the crypto industry are unhappy with SEC Chair Gary Gensler and his regulatory stance.
- Some believe that the CFTC should be regulating crypto instead of the SEC.
- Rep. Warren Davidson's reaction highlights the importance of checks and balances in government.
Incident with Arbutrum Blockchain
- Arbutrum experienced an issue where transactions were unable to be posted to mainnet, potentially causing a lack of finality.
- From the user perspective, everything was functioning fine despite degraded performance.
- This incident raises concerns about system resilience and decentralization in the crypto community.
Potential Hard Fork in Solana Community
- The Solana community is discussing a potential hard fork, but it does not seem to be gaining meaningful traction.
- Alameda, the sister company of FTX, owns a significant portion of the total token allocation in Solana, which is seen as a burden by the community.
Comparison of 2019 and 2023 in Crypto Industry
- The speakers discuss whether 2019 or 2023 is worse for the crypto industry.
- There are mixed opinions, with one speaker believing that 2019 was worse due to fewer entities involved in crypto, while another speaker thinks that now is worse due to personal wealth and higher risk at stake.
Crypto Innovation and Regulation
- Foreign jurisdictions like London and Dubai are leading the charge in crypto innovation due to hostile US crypto regulation.
- The United States should take a more pro-crypto stance given its history with successful tech companies.
Overview of Spark Protocol and MakerDAO
- Spark Protocol is a growth-focused arm of MakerDAO that provides a modern lending engine connected to Maker's cheapest borrowing rates.
- Spark offers users the ability to borrow die at the lowest rate possible, set to the DAI savings rate.
- The protocol has advanced features such as cross-collateralization and the ability to take short positions.
- Ownership of Spark protocol is currently under MakerDAO as a temporary holder, with all admin functions under Maker Governance for security reasons.
Borrowing Rates and Stablecoin Lending Models
- Rates across all stablecoin lending markets, including USDC, will increase due to users switching to the DSR (Die Savings Rate), pulling liquidity out of secondary lending markets.
- Aave uses a peer-to-pool model for lending, while MakerDAO uses a peer-to-protocol model, giving it more pricing power.
Demand for Stablecoins and Yield Strategies
- Stablecoins like DAI have organic spot demand and are used for storing value.
- MakerDAO uses the DSR to bolster demand for stablecoins by paying users for holding them.
- The protocol generates yield on its assets, which flows through to the buffer surplus and pays out DSR rates on a smart contract level.
Future Plans for MakerDAO and Spark Protocol
- MakerDAO is switching from PSMs (Peg Stability Modules) to AMOs (Automated Market Makers) to inject liquidity directly into DEXs.
- Spark Protocol plans to launch on different L2s using the direct deposit module to export activity and supply liquidity wherever users are.
- The team is working on enabling fixed rate lending in DeFi and integrating with other protocols like Element and Sense.
Governance and Involvement with MakerDAO
- The sub-dow is an important place to get involved with MakerDAO, with many sub-dows to choose from based on personal preferences.
- MakerDAO is no longer a conservative place but an opportunity to shape the future, and people are encouraged to get involved.
- The podcast host thanks the guest for coming on and plans to do another update in six months.