Aave and Sky (formerly MakerDAO) appear to be letting bygones be bygones, with both projects getting behind a proposal to promote the adoption of Sky’s new stablecoin on Aave. On Sept. 2, Phoenix Labs, the development behind Sky’s SparkLend money market protocol, published a proposal on Sky’s governance forum to distribute 3.33 million SPK to users depositing sUSDS on Aave v3 as an incentive program to boost the stablecoin’s adoption. The proposal also advocates for launching a decentralized debt market module (D3M) for USDS on Aave’s Lido-focused deployment of its v3 protocol. D3Ms allow users to mint Sky’s stablecoin through third-party protocols. The Aave USDS D3M would have an initial debt ceiling of 100 million. Aave and Spark agreed to equally split all revenue generated from the sUSDS and USDS markets should the proposal pass. “We view this as a first step to a deeper relationship with Aave to promote both protocols as the core of scalable DeFi,” Phoenix Labs said. “This program will help Sky to boost adoption of USDS after launch, and the incentives program will boost Aave’s TVL and revenue by attracting new borrowers.” An initial temperature check proposal to onboard USDS and sUSDS was also published on Aave’s governance forum on Aug. 28. "By working together, DeFi can become the backbone of all finance, enabling unprecedented access and propelling new use cases," Aave Labs tweeted. "We are no longer building on the sidelines; DeFi can empower all of finance." Sky and USDS MakerDAO rebranded to Sky on Aug. 27 alongside announcing plans to deploy its new stablecoin, USDS, and governance token, SKY, on Sep. 18. sUSDS comprises a “staked” version of USDS that will earn yield via the Sky Savings Rate (SSR) — the upcoming counterpart to Sky’s existing Dai Savings Rate (DSR) module for its DAI and sDAI stablecoins. The DSR and SSR provide users access to yield generated by the assets backing the stablecoins, with the DSR currently paying an annual return of (APY) of 6%. ETH comprises 17.2% of DAI’s collateral but drives 28.9% of revenue, while nearly 22% of the assets are U.S. Treasury Bills and account for 26.3% of revenue, and 4.6% comprise real-world assets and make up 5.8% of revenue, according to Dune Analytics. DAI is the third largest stable token behind USDT and USDC with a $5.36 billion market cap, according to CoinGecko. DAI will continue to operate following the launch of USDS, with holders able to migrate DAI for USDS at a one-to-one ratio. Aave is the largest DeFi money market protocol with $11.4 billion in total value locked (TVL), according to DeFi Llama. Aave and Sky rank as the third and fourth largest DeFi protocols by TVL. Past tensions Aave and Sky described the proposal as the first step in “Sky Aave Force,” a collaborative initiative between the two web3 titans to bolster mainstream adoption of DeFi. Notably, the proposal follows long-term tensions between the Aave and Maker. Phoenix Labs launched SparkLend in May 2023 by forking the code for Aave v3. The launch followed an agreement between the two projects for Spark to distribute 10% of its profits to Aave for two years. However, the projects clashed in July, with Marc Zeller, the founder of the Aave Chan Initiative, accusing Spark of engaging in "creative accounting" to distribute only 1% of its profits back to Aave. On April 5, Aave also reduced its loan-to-value ratio for DAI to 63% from 75% over concerns that Maker's risk profile had increased after hastily incorporating Ethena's USDe stablecoin among the collateral assets backing DAI. The price of AAVE is up 2.3% while MKR's price is down 1.8% over the past 24 hours, according to The Defiant's crypto price feeds. Read More: MakerDAO Rebrands To "Sky" and Schedules USDS Stablecoin Launch