Sky Ecosystem Introduces Grove Finance as a New DeFi Protocol
The Sky ecosystem, previously known as MakerDAO, has officially unveiled Grove Finance, a decentralized finance protocol, on June 25. This initiative has been bolstered by a substantial initial funding grant of $1 billion from the Sky ecosystem, aimed at promoting investments in tokenized credit assets, especially collateralized loan obligations (CLOs).
Background of Grove Finance and Its Founders
Grove Finance is being incubated by Grove Labs, a sector of the blockchain firm Steakhouse Financial. The team behind Grove comprises co-founders Mark Phillips, Kevin Chan, and Sam Paderewski, who collectively bring extensive experience from both traditional finance and decentralized finance (DeFi), having previously worked with noteworthy institutions like Deloitte, Citigroup, and BlockTower.
Connecting Traditional Finance with Decentralized Finance
Steakhouse Financial has previously played a pivotal role in integrating real-world assets (RWAs) into the Sky ecosystem, making the launch of Grove a significant step towards bridging traditional credit markets with DeFi. This protocol aims to establish an “institutional-grade credit infrastructure” that seamlessly links decentralized finance with the regulated credit market. By enabling DeFi projects and asset managers to leverage idle funds through on-chain governance, Grove focuses on investing in compliant credit products, particularly those rated AAA, to generate yields that are less impacted by fluctuations in the cryptocurrency market.
Investment Strategies and Structure of the Grove Protocol
Reports indicate that the Sky ecosystem intends to allocate start-up funding to the Anemoy AAA-rated CLO Strategy Fund (JAAA), managed by Janus Henderson in collaboration with the Centrifuge platform. This fund marks a significant milestone as it is the first AAA-rated CLO strategy available for on-chain trading. Grove operates as an open-source, non-custodial protocol, aiming to establish a direct link between DeFi and traditional financial capital, which should enhance capital efficiency, minimize transaction friction, and support diversified fund allocation for asset managers and DeFi protocols.
Distinct Features of Grove Compared to Spark
Both the Grove and Spark protocols are components of MakerDAO’s “Endgame” strategy, functioning as autonomous sub-units (subDAOs) within the Sky ecosystem. However, their operational frameworks and target audiences differ significantly. Launched in 2023, Spark serves as the first sub-unit under the Sky ecosystem, utilizing a revenue model based on “stablecoins + RWAs.” It leverages reserves of DAI/USDS stablecoins to offer products like SparkLend and Spark Savings, enabling users to deposit various stablecoins to earn returns through DeFi and CeFi lending opportunities.
Investment Focus: Spark vs. Grove
Currently, Spark manages over $3.5 billion in stablecoin liquidity across multiple chains and has introduced its governance token, SPK, which has been distributed to the community. This setup allows users to earn additional rewards through staking and governance participation. The Spark team aims to provide returns that exceed those of U.S. Treasuries, appealing to those seeking risk-adjusted income.
In contrast, Grove is primarily aimed at institutional investors looking for substantial credit opportunities. Its initial deployment of $1 billion to establish a connection with Aberdeen’s AAA-rated CLO fund underscores its focus on attracting larger capital investors and asset management firms that require stable income avenues. As Grove is new to the market, it has not yet introduced a governance token, with its current incentives aimed at helping DeFi projects optimize idle reserves and secure returns from high-quality assets.
In summary, while Spark is designed for everyday stablecoin holders seeking yield, Grove operates as an infrastructure protocol targeting large-scale institutional projects and organizations. Both initiatives are integral to the Sky ecosystem’s strategy of incorporating real assets into DeFi, with Spark enhancing stablecoin yields through RWAs and Grove enriching asset allocation through credit products. Grove’s focus on RWAs signifies a strategic move towards solidifying the institutional credit landscape within the DeFi space.
