Can Grove Finance, the decentralized finance protocol strongly promoted by Sky (formerly MakerDAO), become a dark horse in the Real World Asset (RWA) track?

Foresight News

2025-06-28 09:09

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Decentralized Finance protocol Grove Finance receives $1 billion in initial funding support from the Sky ecosystem. The core team members have extensive backgrounds in traditional finance and DeFi. Is a New Real World Asset (RWA) Player Emerging?

Original Title: "Following Spark, Sky Bets on Grove, Will the New RWA Star Shine?"

Original Source: Alex Liu, Foresight News

The Sky ecosystem (formerly MakerDAO) launched a new decentralized finance protocol called Grove Finance on June 25, receiving an initial $1 billion funding allocation from the Sky ecosystem to drive investment in tokenized credit assets (primarily Collateralized Loan Obligations, CLOs).

Grove, incubated by blockchain firm Steakhouse Financial's Grove Labs, has co-founders including Mark Phillips, Kevin Chan, and Sam Paderewski. The core team has extensive backgrounds in traditional finance and DeFi, having previously worked at institutions such as Deloitte, Citi, BlockTower, and Hildene.

Steakhouse Financial has previously played a key role in introducing Real-World Assets (RWA) into the Sky ecosystem, so Grove's debut is seen as another important attempt by Sky to connect more traditional credit markets to DeFi.

Grove's Product Positioning and Technical Architecture

Grove aims to build "institutional-grade credit infrastructure" that bridges decentralized finance with regulated traditional credit asset markets. The protocol allows DeFi projects and asset management firms to route idle funds through on-chain governance to invest in rigorously compliant credit products (currently focusing on AAA-rated CLO strategies) to earn returns independent of crypto market volatility.

Reportedly, the Sky ecosystem will deploy funds into the Anemoy AAA-rated CLO Strategy Fund (JAAA) managed by Janus Henderson, in partnership with the Centrifuge platform, making it the first AAA-rated CLO strategy tradable on-chain.

The Grove protocol operates in an open-source, non-custodial manner, aiming to establish a "DeFi–Traditional Financial Capital Channel" to increase capital efficiency, reduce transaction friction, and provide asset managers and DeFi protocols with programmable, diversified fund allocation capabilities. Official materials indicate that Grove can create new global distribution channels for asset management companies, offer high-end on-chain capital partnerships for protocols/DAOs, and enhance credibility and sustainability for the entire DeFi ecosystem.

In essence, Grove's technical architecture revolves around on-chain governance and automated fund routing, transforming stablecoins or other idle capital held by crypto protocols into institutional-grade credit asset investments, thus achieving a balance between yield and risk.

Grove and Spark: Differences and Similarities

Grove and the Spark protocol within the Sky ecosystem are both part of MakerDAO's ("Sky") "Endgame" transformation plan as autonomous sub-DAOs (also known as "Stars"), but they have distinct positioning and mechanisms.

Launched in 2023, Spark is the first Star in the Sky ecosystem, focusing on a "Stablecoin + RWAs" yield engine. Leveraging the DAI/USDS stablecoin reserve issued by Sky, Spark has introduced products such as SparkLend, Spark Savings, and the Spark Liquidity Layer (SLL). Users can deposit USDS, USDC, or DAI, participate in lending or farming activities, and use a dynamic risk engine to allocate funds to DeFi lending, CeFi lending, and tokenized national debt asset pools, thereby earning relatively stable yields.

Spark is deployed across multiple chains, currently managing over $3.5 billion in stablecoin liquidity, and has launched its native governance token SPK (distributed through an airdrop to the community). Users can earn additional rewards through SPK staking, participating in governance, and community incentives (Community Boost). The Spark team emphasizes transparency and auditability, targeting a yield slightly higher than U.S. Treasury bonds to meet the demand for risk-adjusted returns.

In contrast, Grove focuses more on large-scale institutional credit. Its initial $1 billion deployment is used to connect with Anbang's AAA-rated CLO fund, indicating that Grove targets users with larger fund sizes and higher demands for yield stability (such as asset management companies and DeFi protocols). Currently in its early stages, Grove has just launched, and introducing a governance token is premature. Its incentive mechanism mainly focuses on enabling DeFi projects to "activate idle reserves and earn higher returns from higher-quality assets."

In essence, Spark can be seen as a yield product in the Sky ecosystem targeting regular stablecoin holders, while Grove is the infrastructure protocol for building on-chain credit channels for large projects and institutions. Both are part of Sky's "Endgame" strategy, with a focus on introducing real-world assets on-chain: Spark enriches stablecoin yields with assets like national debt, while Grove enriches DeFi asset allocations with credit assets like collateralized loans.

It can be seen that Grove is focusing on completing the institutional credit puzzle outside of the Spark ecosystem in the RWA track.