Introducing Grove: The Sky Ecosystem’s Institutional Grade Credit Protocol
Grove is Sky’s new institutional‐grade credit engine, tokenizing real‐world assets on-chain to boost USDS yield and capital efficiency.
Kevin Chan
Co-Founder Product and engineering
Sky can change the world
Sky has the potential to facilitate capital formation on a scale unlike we’ve ever seen before. USDS has long-term sticking power as a unit of account, as people across the onchain economy use it to transact and save. Sky’s balance sheet has the benefit of being fully onchain, lending itself to greater transparency and automation than centralized peers. It has also pioneered the use of tokenized financial assets, pushing the adoption of these assets onchain tremendously, supporting the proliferation of access to the US Treasury Bills.
However, large-scale credit in DeFi is still isolated from the world-changing potential of the onchain economy:
Operational and legal complexity of tokenized credit
Translating traditional credit agreements (covenants, default triggers, seniority) into smart contracts is non-trivial and often only shifts how they’re managed
Overcollateralization and capital inefficiency
Most DeFi lending today is strictly over-collateralized, meaning borrowers must lock up crypto assets worth more than the loan they receive, tying up vast amounts of capital that could otherwise fuel growth elsewhere onchain
Lack of real-world identity and credit scoring
Without verifiable identities, credit histories, or legal recourse, protocols cannot price counterparty risk in a sophisticated manner.. As a result, lending remains limited to simple collateralized transactions rather than evolving into nuanced credit products (e.g., syndicated loans, trade finance) that depend on borrower reputation and tailored risk assessments
Introducing Grove: The Sky Ecosystem’s Institutional Grade Credit Protocol | Grove Protocol
What is Grove?
Grove is a new Star in the Sky ecosystem that will unlock the full potential of USDS and help it reach new heights. Its main focus will be on building an institutional-grade credit protocol designed to facilitate credit creation and seamlessly move yield in and out of the onchain economy.
Grove will help Sky address the above challenges in a few meaningful ways:
Sky holders can grow the balance sheet without governance overhead
Scale offchain credit for onchain governance in an Atlas-compliant way
Create farming opportunities for Sky and USDS holders as incentive alignment with Grove governance
USDS holders will be able to access new products and better savings rates
Transparent insight into the allocation of the balance sheet
Diversified and less volatile rates with broader exposure to real world assets
Asset issuers can access credit at scale
Access to credit opportunities with scale in collaboration with leading financial institutions
Grove is an engine for transforming user demand for the largest and most transparent decentralized stablecoin into a competitive and scalable source of balance sheet returns for the ecosystem as a whole. We are partnering with the most innovative and forward thinking development teams and financial institutions to democratize financial opportunity, increase transparency, and help Sky become the connectivity layer that will finally combine decentralized with traditional finance.
We believe now is the right time to merge these worlds and meaningfully move our industry forward. We see tremendous opportunity in integrating tokenized offchain assets into DeFi, and can’t wait to share more about what and who we’re working with on this initiative.
Why Grove?
We believe that Grove will help Sky once again unlock the next of DeFi’s major eras:
Tokenized Dollars - Dai allowed DeFi Summer to take off in 2020 and enabled the onchain economy to move in and out of crypto assets to fiat-referenced units of account
Tokenized US Treasury Bills - MakerDAO drove the industry towards tokenization of treasuries, instigated by initiatives such as the BlockTower Andromeda and the Spark Grand Prix, ushered in an era of t-bill accessibility
→ Tokenized Credit - Grove will help Sky kick-start a new cycle of capital formation by launching the era of Tokenized Credit, and bring financial products that were previously only accessible to a select few, to billions
Grove will enable Sky to significantly increase the allocable universe of credit assets, in particular tokenized off-chain credit. Historically, Sky stability fees have been generated from three sources - overcollateralized crypto loans, US treasury bills, and PSM rewards (i.e. with partners such as Coinbase). In particular, even tokenized offchain assets have been primarily limited to US treasury bills due to governance overhead. The hub-and-spoke model of the Endgame plan will allow Grove to operate more flexibly and with the autonomy to allocate into higher yielding credit, while still adhering to stringent risk and liquidity requirements defined by the Sky Atlas.
Grove will be bringing RWAs onchain at scale, tearing down the wall between centralized and decentralized finance and bringing full parity between the two economies. Further diversifying the collateral base of Sky through Grove will empower Sky to provide more durable and sustainable savings rewards to Sky savings users - especially during periods of elevated market volatility where organic crypto lending rates can approach the low single digits. Importing uncorrelated credit assets into decentralized finance at scale will support the crypto economy and facilitate more stable and sustainable yields for users.
Although integrating RWAs into decentralized finance remains a cornerstone of Grove’s strategy, we’re simultaneously constructing robust “capital highways” that link traditional liquidity sources directly into onchain markets. Grove will create funding channels and forge strategic alliances with leading DeFi innovators, fueling deeper protocol-level liquidity and empowering a new generation of DeFi applications.
Grove’s Vision
Grove is a credit engine that transforms financial complexity into seamless user experiences. We are building an open, innovative, and scalable institutional credit protocol that makes onchain finance intuitive, approachable, and transparent. We aim to empower people to achieve their financial goals by democratizing financial tools. We will make the experience of accessing institutional-grade finance and credit more approachable and intuitive.
Grove is on a mission to help Sky reignite DeFi’s growth, make RWAs great again, and lead the DeFi renaissance. Together, we're planting the seeds of a more open, efficient, and flourishing financial future.
Roadmap
Initial road map
Grove’s initial focus will be on building out the Grove Liquidity Layer, an allocation system comparable to the Spark Liquidity Layer that enables Grove to allocate capital to both on and offchain credit opportunities. The Grove Liquidity Layer extends Sky’s robust and battle tested infrastructure and frameworks while introducing novel functionality. In a similar manner to Spark, the Liquidity Layer enables Grove to build a surplus buffer, also known as first loss capital, further increasing the allocable universe of opportunities and enabling Grove to deploy capital in pursuing vast opportunities at the intersection of DeFi, stablecoins, and traditional finance.
Once the foundation of Grove has been laid, the focus will shift towards development of a new savings product, designed as a complement to sUSDS offering higher rewards. This new savings token will have some new and unique features that we’re excited to share with the community closer to launch.
Reach out as we take root!
With Grove, we’re taking a significant step toward bridging the gap between traditional finance and DeFi, creating a future where financial tools are more accessible, transparent, and efficient. If this resonates with you and you’d like to get involved, please reach out to recruiting@Grove.finance
as we’re currently recruiting for multiple roles. We’re excited to share more details in the coming months, and we invite you to join us in planting the seeds of a more open, collaborative financial future—one that will help Sky truly flourish.
How to navigate Grove Data, the live dashboard covering Grove's deployments, performance, and capital structure across assets, protocols, and networks.
Grove is driving the future of institutional structured credit onchain through a familiar capital-markets format, with the transparency and operational efficiency of blockchain rails.
