MakerDAO Reactivates Aave Deposit Module As DeFi Markets Recover

Two of DeFi’s largest protocols are deepening ties as the sector begins to rebound from the bear market of 2022.

On Wednesday, MakerDAO reactivated its DAI Direct Deposit Module (D3M) for Aave v2.

MakerDAO is the second-largest DeFi protocol with $6.6B in total value locked (TVL) and is an overcollateralized lending protocol allowing users to mint its DAI stablecoin. Aave is the leading decentralized money market with nearly $5B in TVL, according to The Defiant Terminal.

Maker’s D3M allows lending protocols like Aave to mint DAI directly from the MakerDAO protocol to satisfy user demand. In December, MakerDAO voted to launch a D3M allowing Compound, another lending protocol, to mint up to 5M DAI.

Aave v2’s D3M first launched in April 2021, but Maker suspended the module in June 2022 as contagion fears enveloped web3 amid last year’s brutal bear market. That proposal was put together by Maker’s Core Risk Unit in response to the insolvency of Celsius, a centralized crypto lender which had borrowed 100M DAI from Aave v2 using stETH as collateral.

Improved DeFi Outlook

Maker said it is now reactivating the D3M due to the improved market conditions and outlook for DeFi.

“When the decision was made to pause the Aave D3M initiative, the DeFi landscape was vastly different from what it is today,” said Felipe Buiras, a tech lead for MakerDAO’s Growth Core Unit.“The Aave D3M reactivation symbolizes the necessity for fluid and responsive financial models enabled by DeFi.”

Maker’s MKR governance token is up 17% today, making it the top performer among the 100 largest digital assets by market capitalization.

Stani Kulechov, the CEO and founder of Aave Companies, said that collaboration among DeFi’s leading projects will accelerate mainstream adoption of the sector.

Revenue Sharing

And more DeFi collaborations are in the works.

Spark Protocol, a DAI-focused lending protocol built atop Aave v3 by Phoenix Labs — a development team comprising high-ranking members of MakerDAO, has proposed a revenue-sharing agreement between Spark and Aave.
Spark offered to share 10% of its profits with Aave for two years, in exchange for developing on top of its v3 protocol. The proposal received support on Aave’s governance forum.