Aave DAO Delegate Takes Aim at MakerDAO Over Spark Profit Sharing Deal

The Aave Chan Initiative’s Marc Zeller claims that “creative accounting” by MakerDAO puts the actual revenue share from Spark Lend much closer to 1% of profit, as opposed to the agreed upon 10%.

Decentralized finance (DeFi) heavyweights Aave and MakerDAO appear to be in a state of conflict over a profit sharing deal on the Spark Lend protocol.

Marc Zeller, the founder of primary Aave DAO delegate Aave Chan Initiative (ACI), invited the members of Aave’s governance community to comment on a profit sharing agreement between Maker and Aave from 2023 concerning Spark – the lending protocol was born out of a fork of Aave v3. 

“Due to some creative accounting on MakerDAO, the actual revenue share is much closer to 1% of profit by MakerDAO,” said Zeller on the Aave governance forum.

The Aave DAO is now voting on one of three options: to declare Spark in breach of agreement, approve new dynamics in Aave & Maker protocol relationship, or keep the status quo as is. 

The agreement was put forth by Phoenix Labs, the entity behind Spark, in February 2023. The profit sharing deal was to go into effect when the DAI market size on Spark reached 100 million and would expire two years later.

At the time, Phoenix Labs estimated that it would distribute $2 million worth of the DAI stablecoin to Aave over two years, in a situation where the Spark Lend DAI market had a high Total Value Locked (TVL) and utilization. 

Spark’s TVL now sits at around $2.8 billion, according to data from DeFiLlama. Messari estimates that the protocol has generated $42 million worth of revenue over the last year.

According to Zeller, MakerDAO is the main recipient of interest paid by Spark users, because the DAI that it mints into Spark represents 97.8% of DAI liquidity in Spark. In his view, the fact that Phoenix Labs is also on the MakerDAO payroll implies that Spark and Maker can be considered the same entity.

Discussions on the amount owed to Aave are also taking place on MakerDAO’s governance forum. MakerDAO ecosystem actor BA Labs outlined the payment formula that would pay out $1.06 million to Aave. 

Zeller shared his own calculations on the amount owed to Aave – based on his estimates, the Spark/MakerDAO entity rakes in revenue of roughly $89 million per year and Aave should be entitled to 10% of that figure.

MakerDAO founder Rune Christensen also shared his thoughts on the issue in a post on the governance forum, saying that Spark was ultimately created with the goal of making it possible to work more closely with Aave.

“I’m not very impressed with how this idea of a “reset” of the relationship was introduced with threats and hostility coming out of nowhere,” said Christensen.