DeFi Stalwarts Explore Tie-Ups to Weather Bear Market and FTX Fallout
Aave, MakerDAO, Compound and Yearn Seek Partnerships as DeFi Shifts into Next Phase
By: Owen Fernau •DeFi News
When disaster strikes, kindred spirits join together. That appears to be what’s happening in DeFi as the sector’s oldest and most influential protocols lock arms in the wake of the FTX collapse.
On Dec. 4, the members of MakerDAO, DeFi’s No. 1 protocol with $6.4B in total value locked, passed a proposal to supply up to $5M of its DAI stablecoin to Compound, a major DeFi money market. That amount may increase up to $160M, according to a post on Maker’s forum.
Yearn Calls Maker
Teams behind other major protocols are also seeking partnerships — Corn, the pseudonymous head of partnerships and integrations at Yearn Finance, the trailblazing yield aggregator, is calling for Maker to deposit $100M of USDC collateral.
Yearn, in turn, is working with Gnosis’ CowSwap, an exchange aggregator, to enable complex trades. Alchemix, the auto-repaying loan protocol, is looking to add the FRAX stablecoin as collateral. And Synthetix, a derivatives protocol, is looking to modify parameters on Curve.
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All this cross pollination mirrors the business links that have long underpinned TradFi. Yet something else appears to be happening, too — DeFi may be writing the next chapter in its evolution as an industry.
That it’s happening amid the wreckage of CeFi companies such as FTX and Celsius highlights the drive to show the benefits of decentralized finance in contrast to conventional crypto.
To that end, the Maker-Compound deal may be the start of something new. The idea behind the proposal is that it will generate added revenue for Maker by lending to Compound. Precise control of the supply of deposited DAI will also allow Maker to target a borrowing rate of 2% on Compound.
“We are going to be stuck in the old way if we view Compound as a competitor and miss our chance to grow further,” posted one Maker governance delegate in a debate preceding the implementation of the D3M on Compound.
Coinbase has already made a similar play for the USDC in Maker’s Peg Stability Module. Corn is waiting to see whether Maker’s voters believe in Yearn. “It’s the most honest point in time,” the pseudonymous contributor told The Defiant. “We’re really gonna see who has been shilling DeFi [but] votes us down.”
Still, potential partnerships can hit snags. The members of Balancer, a decentralized exchange (DEX), shot down a proposal from Index Coop on Nov. 13 that would have enabled fee sharing, and an over-the-counter token swap.
Chris Blec, a crypto researcher, told The Defiant that he hasn’t seen any changes in how protocols approach what he sees as their fundamental vulnerabilities, like Maker’s dependence on USDC, and general dependence on Chainlink oracles for pricing data.
Even so, as DeFi struggles to separate itself from the existential angst that’s hanging over crypto these days, partnerships provide a clear way forward.
“I think there’s certainly a feeling of mutual respect amongst the protocol-to-protocol conversations that are happening after FTX,” Mike Criff, core contributor at Synthetix, told The Defiant. “There is definitely an opportunity to demonstrate what DeFi is supposed to be and get people bought into that ideal.”