Aave and Sky Join Forces to Bring DeFi to TradFi, Introducing Sky Aave Force

Decentralized applications Aave and Sky have announced a joint effort to take the decentralized finance (DeFi) ecosystem to the traditional finance realm.

Decentralized applications Sky and Aave are joining forces in an effort to integrate DeFi into traditional finance.

The collaboration, dubbed Sky Aave Force, will see the decentralized applications integrate their products seamlessly.

On Aug. 28, Aave submitted a proposal to include Sky's new tokens, Sky Dollar (USDS) and Savings Sky Dollar (sUSDS), which are enhanced versions of the protocol's stablecoin DAI and Savings DAI, respectively.

If approved, the proposal will integrate all of DAI's and sDAI's existing features into Aave, including the ability to use them as collateral, borrow them, and swap them through Paraswap.

Meanwhile, on Sept. 2, Sky submitted a proposal explaining that the idle supply of sUSDS used as collateral on Aave will be able to earn Sky Savings Rate (SSR), the yield feature associated with USDS.

“This program will help Sky to boost adoption of USDS post launch, and the incentives will boost Aave's TVL and revenue by attracting new borrowers,” reads Sky's proposal.

Additionally, users who choose to use sUSDS as collateral on Aave v3 will also be eligible for the pre-farming airdrop of SPK, the token for Spark, the money market that is connected to the Sky ecosystem. The Aave team has agreed to place the rewards in the sUSDS market and will update their UI to display the SPK rewards.

Sky's proposal also suggests creating a Direct Deposit Module (D3M) within Aave's Lido-specific instance. This would enable a smart contract to transfer USDS tokens from Sky directly to a lending pool on Aave, which according to the proposal would accelerate the adoption of both USDS and wstETH.

The Sky Aave Force initiative follows both Aave's and Sky's recent focus on integrating real-world assets (RWA).

Sky is the new brand for MakerDAO, which has introduced two new versions of its tokens: SKY and USDS. While SKY is the upgraded version of the MKR governance token, USDS is the upgraded version of the DAI stablecoin.

The concept of upgraded versions of MKR and DAI was first formally shared in a May 15 blog post by MakerDAO co-founder Rune Christensen. The idea is to make USDS more compliant with the jurisdictions in which it is offered, so that the stablecoin can be used in mainstream RWA applications.

On the other hand, Aave has introduced a proposal for a new GHO Stability Module (GSM), which involves using BlackRock's tokenized fund BUIDL's shares to generate additional yield for its stablecoin holders.

After a user swaps USD Coin (USDC) for Aave's GHO, the smart contract will be able to swap the USDC amount for BUIDL's shares. As BlackRock's fund generates yield daily, GHO holders will have an extra avenue for value accrual.

Moreover, the integration could serve as a starting point for further partnerships between Aave and BlackRock in the RWA space, according to the proposal.