Purchasing a second brand/frontend (Spark)

Governance General
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This might sound crazy, but Spark’s token SPK has a fully diluted valuation of $217 mil versus Aave’s 3.09B and has around 8-9% of Aave’s market size along with a profitable stablecoin DAI/USDS (instead of one owned by Aave Labs that Aave DAO is losing money on). They appear to have done a good job with the frontend.

Aave DAO should perhaps consider putting out an offer to convert SPK token to Aave at value+3% in a buyout? Realistically it doesn’t make sense for two of the oldest DAO’s (Maker+Aave) to be competing. Aave’s annual revenue on around 50B of assets is $174M while Maker/Sky made an annual revenue of $430M off 11B. I’m not sure what Aave’s profit off that is but we are managing a $50M buyback annually with 3.54% staking while Maker/Sky profits around 200M before investments/staking and has a $110M buyback program with 15.78%. So clearly Aave is not making enough money versus the assets it is offering loans against, if acquiring Spark allows Aave to inherit the deals Spark has with Sky where they make a % of savings deposits made and USDS issued (I believe its 20 points on each) Aave could end up making the money it spends to acquire a competitor back in under a year.

Having a backup frontend would increase the DAO’s resiliency, would gain the DAO an additional source of revenue (instead of an expense ala GHO), and turn a competitor into a resource. Acquiring Spark wouldn’t be an expense, it would be an investment that would likely boost Aave token price more than the cost of issuing new tokens would decrease it.

If we are worried that USDS (the third largest stablecoin behind USDC/USDT) may be manipulated we can choose to use DAI which has a better reputation and isn’t reprogramable, or request a stablecoin unique to Aave be created that Maker can swap 1:1 with USDC/USDT the same as they do USDS. Right now GHO is a pain to obtain for USDC so it would be nice to get the 1:1 conversion.

Spark also has a credit card, fixed term loans, and mobile app coming so we’d get those.

In any negotiation with Avara (the company that owns Aave Labs, Gho, Horizon, Lens, etc) we need to ensure we have power, having a second frontend team who can step in almost immediately gives us that power. Coinbase recently acquired the team behind a dapp leaving the token holders high and dry, there’s no reason we can’t pull a reverse-Coinbase and acquire the dapp (and team). We need to be the ones aggressively expanding or maybe Coinbase will acquire Avara next.

At the very least I think we should inquire if they’d be interested and setup a meeting between the top 3 delegates of both DAOs. And even if they aren’t interested in a buyout maybe they’d be interested in signing a contract to maintain a backup frontend for us for a small monthly retainer, we know their frontend works as their our competitor! Maker has one of the better reps in the crypto space so at least we can trust them to keep their deals to some extent.

In corporate America monopolies are banned because competition keeps companies profit margins down, there’s no reason we have to obey that rule in crypto. Let’s create a monopoly, we can vertically integrate as the largest stablecoin issuer, savings, borrow, and investment dapp. In addition there’s no reason we can’t have two different frontend teams and two different websites/dapps in one DAO.

data dot spark dot fi to view their stats

info dot sky dot money to view Maker’s

PS: Maker/Spark do analytics a lot better than Avara does, you can actually see straight up how much they are making/spending.

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Hello, thanks for pushing this proto-proposal to the governance forum.

I’m completely opposed to a merger with Spark

  1. Spark is one of many “Stars” from the Sky ecosystem; they have very little intrinsic value, and their value prop will be diluted ad nauseam by Sky doctrine to monetize as many token spinouts as they can get away with.
  2. Spark team is not particularly valuable in an acqui-hire scenario, their engineers are below our internal resources with @bgdlabs, and there’s no visible added value to absorb them inside the Aave ecosystem
  3. I have high doubts that the Spark leadership which has repeatedly shown misalignment with the Aave ecosystem, would consider this option viable; they are currently very well compensated (>1M$ per month) per Sky to operate on top of their own revenue and token holdings
  4. Spark functions because they benefit from cheap credit lines from Sky to mint USDS, convert it to other stablecoin, and benefit from a carry trade by earning a premium in lending venues (Spark liquidity Layer). This isn’t as easy to replicate with GHO, and if the Aave DAO would like to develop further in that direction, the DAO has internal resources and capable service providers such as @TokenLogic to execute the strategy.
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Can’t reply to all of these as much is personal opinion. I’d say the idea would be partially to get away from the reliance on Avara but also to make Maker and Aave links in a vertically integrated chain instead of competitors. Also Spark comes with customers+revenues so it’s not like Aave loses out…Spark makes 18M projected off 2.2B in assets while Aave makes 174M of 50B. Spark would increase our revenue to market cap ratio not decrease. Aave honestly has terrible profitability given our market size.

  1. Most of the Aave copies ripped off our code for free without citation while Spark paid Aave licensing fees so I’m not sure what you mean by misalignment? Considering I think Ethlend (now Aave) ripped off Maker’s original code without compensation I think it was pretty generous for them to pay us to do similar. I’m not aware of what the compensation details are between Sky and Spark besides the 0.2% off loans/savings.

  2. Cheap credit lines sound pretty attractive. Also GHO isn’t owned by Aave DAO yet Aave DAO is paying to develop/fund/expand it. It brings us no profits and if it ever starts making a profit that profit may not go to us. At least if we get Spark’s deals we know what we’re making and there’s 0 cost to us it’s all commission. Do we really want to keep pouring money into Gho hoping someday that it’ll be a success and Avara might decide to share their Gho revenue with us (just like the CoWswap revenue I’ve seen no agreement where they’ve said we’ll get anything despite us funding the development and advertising) or should we just take on the stable that is willing to pay us money to adopt it and is already fully supported/a success?

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Hello, I think it would add value to disclose your position and personal stake in the spark/sky ecosystem.

Having worked and used extensively on the makerDAO ecosystem preceding my time at Aave, your statement about any version of Aave “ripping off” code from SAI/DAI isn’t accurate in any shape and form and both codebase are public so there’s no specific need to for me to futher develops on this unless you believe makerDAO invented and is entitled to patent the concept of maths with wad and ray but I think we can stick to reasonable discussions.

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Ethlend pulled from Maker, Aave pulled from Compound with the launch of pooled liquidity after the rebrand. This is pretty common knowledge. I own no Spark, I own some Sky, I own some Aave. I have a tiny bit of staked GHO sitting around.

I mean back then everyone was working together to do fun things it wasn’t so competitive and no one really minded if each built on each other. There wasn’t any explicit copying of code, just architecture and ways things are done. That being said just because you take a sentence and change the words doesn’t mean it’s not a copy.

Edit: Feels like I should be more specific here but it’s hard to be specific about things that happened so many years ago. In the end when there’s so little code to draw from you draw from the examples you have which is understandable. Ethlend did do generally different things with a peer to peer model instead of Maker’s vaults.

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I respectfully disagree, When taking a step back, everything done onchain Maker, compound, aave or others, didn’t reinvent the wheel and borrowed from concepts and mechanism already presents in finance (lombard loans, kink model on interest curves, repo markets, eurodollars and so on).

So I do not wish to add noise to this discussion on semantics or global concepts as it add little value, I answered on the substance of the proposal and the substance alone should remain the focus.

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